We study a dynamic equilibrium model where the same optimal monetary policy is implemented with and without full commitment if government debt is indexed. In contrast, with nominal debt, the full commitment policy is time inconsistent, since the government is tempted to inflate away its nominal...

We characterize the optimal sequential choice of monetary policy in economies with either nominal or indexed debt. In a model where nominal debt is the only source of time inconsistency, the Markov-perfect equilibrium policy implies the progressive depletion of the outstanding stock of debt,...

In this paper we develop a general equilibrium model in which firms finance investment by signing long-term contracts with a financial intermediary. Due to enforceability problems, financial contracts are constrained optimal, that is, they maximize the surplus of the contract subject to...

We study the interplay between competition and trust as efficiency-enhancing mechanims in the private provision of money. With commitment, trust is automatically achieved and competition ensures efficiency. Without commitment, competition plays no role. Trust does play a role but requires a...