allows banks in different regions to smooth local liquidity shocks by borrowing and lending on a world interbank market. We … show under which conditions financial integration induces banks to reduce their liquidity holdings and to shift their … portfolios towards more profitable but less liquid investments. Integration helps reallocate liquidity when different banks are …

model is based on the incomplete-market model of Bewley (1980) where money serves as a store of value and provides liquidity … liquidity demand can lead to sluggish movements in aggregate prices and positive responses from aggregate output to transitory … more) to avoid 10% annual inflation. The large welfare cost of inflation arises because inflation destroys the liquidity …

is shown that when money is a vital form of liquidity to meet uncertain consumption needs, the welfare costs of inflation … inflation tightens liquidity constraints by destroying the buffer-stock value of money, thus raising the volatility of … banking system can reduce the welfare costs of inflation by alleviating liquidity constraints, with realistic credit limits …