The authors study the monetary theory implications of fixed costs associated with trade in private assets. The authors show that with heterogeneous endowment profiles it is possible for an endogenous subset of agents to hold currency even when it is dominated in return by a competing asset. With...

We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code....

We present a theory of unsecured consumer debt that does not rely on utility costs of default or on enforcement mechanisms that arise in repeated-interaction settings. The theory is based on private information about a person's type and on a person's incentive to signal his type to entities...

We develop a model of banking industry dynamics to study the quantitative impact of regulatory policies on bank risk‐taking and market structure. Since our model is matched to U.S. data, we propose a market structure where big banks with market power interact with small, competitive fringe...

We relax a standard assumption on the matching technology in a search model of money. In particular, agents may remain in a long-term partnership as long as it is in their self-interest. With this simple modification, it is possible to support self-enforcing, intertemporal trade which resembles...

We examine how groups of agents form trading networks in the presence of idiosyncratic risk and the possibility of contagion. Specifically, four agents play a two-stage finite repeated game. In the first stage, the network structure is endogenously determined through a non-cooperative proposal...