This paper derives the optimal size of the financial sector using a general equilibrium framework that is an extension of Holmstrom and Tirole's 1997 paper. We show that the financial sector has a unique optimal size relative to the size of the economy as a whole. Creating and maintaining this...

Prepaid cards, cash cards, electronic purses, smart cards these are but a few of the elements inthe revolution now taking place in monetary systems around the world. At that movement's heart is the emergence of a new value transfer system where alternative monies are offered toconsumers through...

This paper investigates the demand by households for transaction services from the financial sector. Households buy several goods with any of several media of exchange. The households choose the medium of exchange to use for each type of good, how much of each type of medium to hold, and the...

We introduce a new measure of the extent of federal regulation in the U.S. and use it to investigate the relationship between federal regulation and macroeconomic performance. We find that regulation has statistically and economically significant effects on aggregate output and the factors that...

Friedman's Permanent Income Hypothesis (PIH) predicts that the income elasticity of consumption should be higher for households for which a large fraction of the variation of their income is permanent than for households facing more transitory variations in income. We test this prediction using...