In the 2001 U.S. Survey of Consumer Finances (SCF), 27% of households report simultaneously revolving significant costly credit card debt and holding sizable amounts of low-return liquid assets; this is known as the "credit card debt puzzle". In this paper, I quantitatively evaluate the role of...

What determines which assets are used in transactions? We develop a framework where the extent to which assets are recognizable determines the extent to which they are acceptable in exchange - i.e., their liquidity. We analyze the effects of monetary policy on asset markets. Recognizability and...

We study economies with multiple assets that are valued both for their return and liquidity. Exchange occurs in decentralized markets with frictions making a medium of exchange essential. Some assets are better suited for this role because they are more liquid - more likely to be accepted in...