This article employs contract theory to analyze the evolution of the payments system. Insights gained are used subsequently to evaluate three prominent public payments system policies: monetary policy, central bank lending, and deposit insurance

The evolution and structure of the payments system is explained by efficiency gains from substituting claims on particular institutions for commodity money. Information-intensive lending and payments services have been provided jointly by the same set of institutions, i.e., banks, because...

Financial deregulation is widely understood to have important economic benefits for microeconomic reasons. Since Adam Smith, economists have provided arguments and evidence that unfettered private markets yield outcomes that are superior to public sector alternatives. But financial...

Financial deregulation is widely understood to have important economic benefits for microeconomic reasons. Since Adam Smith, economists have provided arguments and evidence that unfettered private markets yield outcomes that are superior to public sector alternatives. But financial regulations -...

The paper explores the relationship between financial stability, deflation, and monetary policy. A discussion of narrow liquidity, broad liquidity, market liquidity, and financial distress provides the foundation for the analysis. There are two preliminary conclusions. Equity prices are a...