The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical … for government money, where the terms of bank deposit contracts are constrained by the liquidity insurance available in …

order to generate a role for money and intermediation. We ask whether there is any reason to expect the emergence of a … banking sector (i.e., institutions that combine the business of money creation with the business of intermediation). In our … model the unique equilibrium is characterized, in part, by the existence of an agent that: (1) creates money (a debt …

In this paper, I provide a rationale for why money should earn interest; or, what amounts to the same thing, why risk …-free claims to non-interest-bearing money should trade at discount. I argue that interest-bearing money is essential when … individual money balances are private information. The analysis also suggests one reason for why it is sufficient (as well as …

friction in order to generate a role for money and intermediation. They ask whether there is any reason to expect the emergence … of a banking sector (i.e., institutions that combine the business of money creation with the business of intermediation …). In their model, the unique equilibrium is characterized partly by the existence of an agent that: (1) creates money (a …

The business of money creation is conceptually distinct from that of intermediation. Yet, these two activities are … question: When is banking essential? There is a role for money due to a lack of record-keeping and a role for intermediation … due to the existence of private information: both money and intermediation are essential. When monitoring costs associated …

Lagos and Wright (2005) demonstrate how the essential properties of a money-search model are preserved in an … markets under limited commitment and private information. The analysis demonstrates clearly how insurance, credit, and money … the Friedman rule. In particular, I find that the same frictions that render money essential may at the same time operate …

money. When lump-sum taxation is not permitted, fiat money may still improve welfare--but only if its circulation is …