We develop a model where: (i) banks take deposits and make investments; (ii) their liabilities facilitate third-party transactions. Other models have (i) or (ii), not both, although we argue they are intimately connected: we show that they both emerge from limited commitment. We describe an...

What determines which assets are used in transactions? We develop a framework where the extent to which assets are recognizable determines the extent to which they are acceptable in exchange--i.e. it determines their liquidity. Recognizability and liquidity are endogenized by allowing agents to...

What determines which assets are used in transactions? We develop a framework where the extent to which assets are recognizable determines the extent to which they are acceptable in exchange--i.e. it determines their liquidity. Recognizability and liquidity are endogenized by allowing agents to...

The purpose of this paper is to discuss some of the models used in New Monetarist Economics, which is our label for a body of recent work on money, banking, payments systems, asset markets, and related topics. A key principle in New Monetarism is that solid microfoundations are critical for...

We motivate and provide an overview to New Monetarist Economics. We then briefly describe the individual contributions to the <italic>Macroeconomics Dynamics</italic> special issues on money, credit, and liquidity.

The effects of money (anticipated inflation) on capital formation is a classic issue in macroeconomics. Previous papers adopt reduced-form approaches, putting money in the utility function, or imposing cash in advance, but using otherwise frictionless models. We follow instead a literature that...

What determines which assets are used in transactions? We develop a framework where the extent to which assets are recognizable determines the extent to which they are acceptable in exchange - i.e., their liquidity. We analyze the effects of monetary policy on asset markets. Recognizability and...