Interest on reserves allows the Federal Reserve to pursue an appropriate monetary policy even with a high level of excess reserves. However, a banking system flush with excess reserves can raise the risk of monetary policy getting behind the curve.

I study the effects of inflation on the purchasing behavior of buyers in the Lagos-Wright monetary economy. The standard framework fails to capture the long-standing intuition that when inflation increases, agents try to spend their money holdings speedily. I propose a simple, realistic...

A substantial body of literature has now developed as a result of efforts to identify the fundamental reasons for the fragility of financial intermediaries in the Diamond-Dybvig theory of banking. Many of these articles focus on the interaction between sequential service and uncertainty about...

We study the role of commitment in a version of the Diamond-Dybvig model with no aggregate uncertainty. As is well known, the banking authority can eliminate the possibility of a bank run by committing to suspend payments to depositors if a run were to start. We show, however, that in an...