This paper presents a careful reexamination of Chan, Karolyi, Longstaff, and Sanders (CKLS 1992). By redefining the possible regime shift period in line with evidence from known policy changes and past empirical research, we find evidence that contradicts the major results in their paper. The...

Using a neoclassical monetary model, we investigate the welfare cost of a payment system that operates as a real-time gross settlement (RTGS) system. We illustrate how the cost of such systems does not ultimately derive from factors such as "payments gridlock" but instead from the credit...

We examine the question of whether transactable forms of privately issued, demandable debt are better used as "banknotes" or "checks." The distinction between the two is that a check must be redeemed by the issuing bank with each use, whereas a banknote can circulate. We find that the answer to...

This paper applies new computational methods for studying nonstationary dynamics to reevaluate the welfare cost of inflation. A dynamic stochastic general equilibrium model with heterogeneous agents is studied. Incomplete markets induce agents to hold a fiat currency as insurance against...

This paper investigates the question of why banks almost always settle payments in cash as opposed to debt. Our model suggests that adverse selection with respect to the quality of bank assets may be the primary motivation underlying this practice. Banks with higher-quality assets prefer not to...