We develop a new framework to study the implementation of monetary policy through the banking system. Banks finance illiquid loans by issuing deposits. Deposit transfers across banks must be settled using central bank reserves. Transfers are random and therefore create liquidity risk, which in...

I study an economy where asymmetric information about the quality of capital endogenously determines liquidity. Liquid funds are key to relaxing financial constraints on investment and employment. These funds are obtained by selling capital or using it as collateral. Liquidity is determined by...

This paper introduces an endogenous network of payments chains into a business cycle model. Agents order production in bilateral relations. Some payments are executed immediately. Other payments, chained payments, are delayed until other payments are executed. Because production starts only...

En este trabajo se determina el problema de la gestión óptima de la deuda pública en una pequeña economía abierta. El Gobierno emite un continuo de bonos de vencimiento finito sujeto a restricciones de liquidez. Hallamos que la solución puede ser descentralizada: la emisión óptima de un...

Speculation, in the spirit of Harrison and Kreps [1978], is introduced into a standard real business cycle model. Investors (speculators) hold heterogeneous beliefs about firm growth. Firm ownership, and thus, the firm's discount factor varies with waves of optimism and leverage. These waves...