We propose a monetary model with endogenous credit market participation to study the impact of financial inclusion on inequality and welfare. We find that consumption inequality results from differences in agents' decision to access financial services. This heterogeneity generates a pecuniary...

We study the endogenous choice to accept fiat objects as media of exchange and their implications for nominal exchange rate determination. We consider a two-country environment with two currencies which can be used to settle any transactions. However, currencies can be counterfeited at a fixed...

What causes currency substitution (foreign money substituting for domestic money)? What significance has it had in recent banking crises? And what is the relationship between currency conversion and macroeconomic volatility in Latin America?Gomis-Porqueras, Serrano, and Somuano study how agents...

In this paper we study optimal monetary and fiscal policies, and the welfare costs of inflation, within the Lagos and Wright (2005) framework. Monetary equilibria may be inefficient without fiscal policy tools due to bargaining frictions. We show that subsidies in decentralized markets can be...