We investigate the efficiency property of a monetary economy with spot trade. We prove a conjecture that is essentially due to Bewley ("Models of Monetary Economics" (1980); "Econometrica" 51 (1983), 1485-504). The gist is that monetary spot trading is nearly efficient ex ante in an environment...

We construct a model of the credit market where financial contracting is subject to costly state verification and moral hazard. The economy's aggregate activity and its equilibrium lending mechanism are determined jointly. We analyze how changes in the model's exogenous variables, including the...

This article investigates the characteristics of stationary single-price equilibrium in a monetary random-matching model where agents can hold an arbitrary amount of divisible money and where production is costly. At such an equilibrium, agents' money holdings are endogenously determined and...