Many countries simultaneously suffer from high inflation, low growth and poorly developed financial sectors. In this paper, we integrate a microfounded model of money and finance into a model of endogenous growth to examine the effects of inflation on welfare, growth and the size of the...

In a monetary search model with nominal bonds, agents face matching/taste shocks but they cannot insure, borrow or trade against such shocks. A government imposes a legal restriction that prohibits bonds from being used to buy a subset of goods. I show that this legal restriction can increase...

The objective here is to evaluate the quantitative importance of financial frictions in business cycles. The analysis shows that a negative financial shock can cause aggregate investment, employment and consumption to fall with output. Despite this realistic comovement among macro quantities, a...