We explore the connection between money, banks, and aggregate credit. We start with a simple real' model without money, where banks make loans repayable in goods and depositors hold claims on the bank payable on demand in goods. Aggregate production may be delayed in the economy. If so, we show...

Woodford (2003) describes a popular class of neo-Wicksellian models in which monetary policy is characterized by an interest-rate rule, and the money market and financial institutions are typically not even modeled. Critics contend that these models are incomplete and unsuitable for...

This paper studies a model where money is valued for the liquidity services it provides in the future. These liquidity services cannot be provided by any other asset. Changes in expectations of the value of future liquidity services affect the desired proportions of money and other assets in...

The paper discusses simple microfoundations for Liquidity Deflation (Calvo 2016, Chapter 2), which gives rise to liquidity trap under perfectly flexible prices/wages. Unlike Keynes (1936), this is a Supply Side Liquidity Trap, SSLT, not resolved by a fall in prices /wages, or massive helicopter...

Monetary theory and policy are part of intertemporal public finance. The lecture reviews some interesting recent developments. The two ghosts are the venerable liquidity trap and the Pigou effect or real balance effect. The eccentricities are negative nominal interest rates and the helicopter...

This paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation. Sellers can change price only by incurring a real menu cost.' We calibrate this cost and the variance and autocorrelation of the...

The paper's arguments include: (1) Medium-of-exchange money will not disappear in the foreseeable future, although the quantity of base money may continue to decline. (2) In economies with very little money (e.g., no currency but bank settlement balances at the central bank), monetary policy...

This paper develops a model of inflation inertia based on optimizing forward looking staggered price setting in a small open economy. Unlike in current models of sticky prices, transitions to a lower steady state inflation rate take time even if they are fully credible, and they are associated...

We study the transmission of monetary policy shocks in a model in which realistic heterogeneity in price rigidity interacts with heterogeneity in sectoral size and input-output linkages, and derive conditions under which these heterogeneities generate large real effects. Empirically,...