The effects of monetary policy depend significantly on the capacity of the Central Bank to affect market interest rates by managing liquidity. Therefore, it comes out as an important issue to determine the degree of flexibility of lending and deposit rates to changes in policy rates. In this...

What are the benefits provided by a payment system? What are the tradeoffs in public versus private payment systems and in restricted versus open payments arrangements? Modern payment systems encompass a variety of institutional designs with varying degrees of counterparty protection. We develop...

From 1863-1914, banks in the U.S. could issue notes subject to full collateral, a per-period tax on outstanding notes, redemption of notes on demand, and a clearing fee per issued note cleared through the Treasury. The system failed to satisfy a purported arbitrage condition; i.e., the yield on...

We study unofficial dollarization, i.e., the use of foreign money alongside the domestic currency, in an environment where spatial separation and limited communication create a role for currency and banks arise endogenously to provide insurance against liquidity preference shocks. Unofficial...

From 1863-1914, banks in the U.S. could issue notes subject to full collateral, a per-period tax on outstanding notes, redemption of notes on demand, and a clearing fee per issued note cleared through the Treasury. The system failed to satisfy a purported arbitrage condition; i.e., the yield on...

We study unofficial dollarization, i.e., the use of foreign money alongside the domestic currency, in an environment where spatial separation and limited communication create a role for currency and banks arise endogenously to provide insurance against liquidity preference shocks. Unofficial...

This paper provides a tractable search model with divisible money that encompasses the two frameworks currently used in the literature. In the model, individuals belong to many villages. Inside a village, individuals are not altruistic as in a representative household, but they share information...

Interest rate rules for monetary policy and tax rules for fiscal policy change stochastically between two regimes. In the first regime monetary policy follows the Taylor principle and taxes rise strongly with increases in the real value of government debt; in the second regime the Taylor...

This paper investigates the empirical relevance of a new framework for monetary policy analysis in which the decision makers are allowed to weight differently positive and negative deviations of inflation and output from the target values. Reduced-form and structural estimates of the central...

This paper shows the way how persistent world inflation shocks hitting a small open economy can re-weight the importance of domestic and foreign factors in the determination of prices. In this sense, we study why the recently observed global disinflation environment may imply a weakening of the...