This paper develops a search-theoretic model to study the interaction between banking and monetary policy and how this interaction affects the allocation and welfare. Regarding how banking affects the welfare costs of inflation: First, we find that, with banking, inflation generates smaller...

I analyze the interaction between buyers' information acquisition and market liquidity in over-the-counter markets with adverse selection. If a buyer anticipates that future buyers will acquire information about asset quality, she has an incentive to acquire information to avoid buying a lemon...

One of the most robust stylized facts in macroeconomics is the forecasting power of the term spread for future real activity. The economic rationale for this forecasting power usually appeals to expectations of future interest rates, which affect the slope of the term structure. In this paper,...