We develop a model of monetary exchange in over-the-counter (OTC) markets and use it to study the effects of inflation on asset prices, as well as on standard measures of financial liquidity, such as the size of bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy,...

Recent events in the U.S. and Europe have renewed interest in the desirability of imposing constraints on fiscal policy. In the U.S., the implementation of large and persistent deficits as a response to the financial crisis and subsequent recession motivated debates about debt ceilings and...

We develop a variant of the Lagos and Wright (2005) model to study the role of real assets as media of exchange (private money). There is productive capital in the model that is controlled by an asset fund that finances itself by issuing claims against the capital stock. Although the claims are...