The authors study optimal monetary policy in a model in which fiat money and private debt coexist as a means of payment. The credit system is endogenous and allows buyers to relax their cash constraints. However, it is costly for agents to publicly report their trades, which is necessary for the...

This paper studies optimal monetary and fiscal policies in an economy à la Lucas and Stokey (1983) and Lagos and Wright (2005) with multiple cash and credit goods. We show that optimal policies are in general time inconsistent due to insufficient number of instruments to influence future...