"Why is inflation persistently high in some periods and low in others? The reason may be absence of commitment in monetary policy. In a standard model, absence of commitment leads to multiple equilibria, or expectation traps, even without trigger strategies. In these traps, expectations of high...

We study a model with heterogeneous producers that face collateral and cash in advance constraints. These two frictions give rise to a non-trivial financial market in a monetary economy. A tightening of the collateral constraint results in a credit-crunch generated recession. The model can...

"We study how competition from privately supplied currency substitutes affects monetary equilibria. Whenever currency is inefficiently provided, inside money competition plays a disciplinary role by providing an upper bound on equilibrium inflation rates. Furthermore, if Furthermore, if 'inside...