The mechanism-design approach to monetary theory is the search for fruitful settings in which money is necessary for … observations and policy questions. Settings with three frictions are considered: imperfect monitoring, costly connections among … people, and imperfect recognizability of assets. An illustrative model with those frictions is used to explain as an optimum …

A wide range of heterodox theories claim that banks are special because they create money in the act of lending. Put …

. We report that the different approach to modeling money - reduced-form vs. explicit role - neither induces theoretical … mechanism that governs cash transactions, not the explicit microfoundation of money. …

Monetary theory texts teach that governments create money and control monetary policy. Researchers at the Bank of … England, IMF and many others show that fractional reserve banking allows the private sector to create money. Most money … based debt is intimately connected to the process of money creation in the modern financial system. It should be obvious …

This paper advances three fundamental propositions regarding money: (1) As R. W. Clower (1965) famously put it, money … buys goods and goods buy money, but goods do not buy goods. (2) Money is always debt; it cannot be a commodity from the … possible. These three propositions are used to build a theory of money that is linked to common themes in the heterodox …

body of recent work on money, banking, payments systems, asset markets, and related topics. A key principle in New … inflation, the relationship between money and capital accumulation, and the Phillips curve. We also extend the benchmark model …

We establish a benchmark result for the relationship between the loanablefunds and the money-creation approach to …

We study money creation and destruction in today's monetary architecture and examine the impact of monetary policy and … capital regulation in a general equilibrium setting. There are two types of money created and destructed: bank deposits, when … banks grant loans to firms or to other banks and central bank money, when the central bank grants loans to private banks. We …

individual banks that face random investment opportunities by creating inside money. Banks are subject to a reserve requirement … and have access to the interbank money market. The model shows that lowering the money market rate relative to the … inflation rate reduces investment and welfare. This is because the money market is an outside option for banks that face bad …