The long-run welfare costs of inflation are studied in a micro-founded model with trading frictions and costly liquidity management. By modelling the liquidity management decision, the model endogenizes the responses of velocity, output, the degree of market segmentation, and the distribution of...

The generation and implementation of ideas, or knowledge, is crucial for economic performance. We study this process in a model of endogenous growth with frictions. Productivity increases with knowledge, which advances via innovation, and with the exchange of ideas from those who generate them...