In monetary models in which agents are subject to trading shocks there is typically an ex-post inefficiency in that some agents are holding idle balances while others are cash constrained. This inefficiency creates a role for financial intermediaries, such as banks, who accept nominal deposits...

In monetary models in which agents are subject to trading shocks there is typically an ex-post inefficiency in that some agents are holding idle balances while others are cash constrained. This inefficiency creates a role for financial intermediaries, such as banks, who accept nominal deposits...

We extend the study of banking equilibrium in Berentsen, Camera and Waller (2007) by introducing an explicit production function for banks. Banks employ labor resources, hired on a competitive market, to run their operations. In equilibrium this generates a spread between interest rates on loans...

We study an economy in which exchange occurs pairwise, there is no commitment, and anonymous agents choose between random monetary trade or deterministic credit trade. To accomplish the latter, agents can exploit a costly technology that allows limited record-keeping and enforcement. An...

We use a modified version of the Lagos-Wright model to introduce an essential role for banks. Due to preference shocks, agents have excess demand for or supply of money balances. Banks arise to reallocate excess cash by taking deposits from sellers and making loans to buyers. We consider two...

In many situations, some people hold large money balances but have no particular urgency to spend them while others are liquidity constrained. This problem creates a role for financial intermediaries who accept nominal deposits and make nominal loans. We show that financial intermediation...