This paper studies the incentives of participants in a real-time gross settlement system with and without the addition of a liquidity-saving mechanism (LSM). Participants in the model face a liquidity shock and different costs for delaying payments. They trade off the cost of delaying a payment...

Credit rating agencies (CRAs) are accused of bearing a strong responsibility for contributing to the subprime crisis by having been deliberately too lax in the ratings of some structured products. In response to this accusation, CRAs argue that such an attitude would be too dangerous for them,...

An environment is analyzed in which agents join clubs (payment networks) in order to facilitate trade. The networks compile personal identifying data (PID) so as to match transactors to transactions histories. Technological limitations cause the networks' data management practices to impact each...

Payments are increasingly being made with payment cards despite the fact that the cost of clearing a card payment usually exceeds the cost of transferring cash. We examine this puzzle through the lens of monetary theory. We consider the design of an optimal card-based payment system when cash is...

The quintessential crime of the information age is identity theft, the malicious use of personal identifying data. In this paper we model "identity" and its use in credit transactions. Various types of identity theft occur in equilibrium, including "new account fraud," "existing account fraud,"...

A fiat money system was introduced in the seventeenth century by a prominent public bank of the time, the Bank of Amsterdam. Employing data from the bank׳s archives, we show that bank money became a more attractive transactions medium following a 1683 policy change, which unbundled the bank׳s...