José-Víctor Ríos-Rull

In a dynamic model with limited commitment, aggregate payout-based compensation induces managers to raise outside equity yet invest too little today. Per-share compensation eliminates the dilution motive and restores efficient investment, but it does so through slower capital accumulation that better protects incumbent shareholder value.

We document that, across households, the money consumption ratio increases with age and decreases with consumption, and that there has been a large increase in the money consumption ratio during the recent era of very low interest rates. We construct an overlapping generations (OLG) model of money holdings for transaction purposes subject to age (older households use more money), cohort (younger generations are exposed to better transaction technology), and time effects (nominal interest rates affect money holdings).