Two observations have sometimes been viewed as evidence that the equilibrium allocations of intermediated credit markets are inefficient. First, low-income households' marginal propensity to consume is close to unity. Second, even high-income households seem to face nonprice constraints during...

The article shows that in a finite-trader version of the Diamond and Dybvig model (1983), the ex ante efficient allocation can be implemented as a unique equilibrium. This is so even in the presence of the sequential service constraint, as emphasized by Wallace (1988), whereby the bank must...

A current U.S. policy is to introduce a new style of currency that is harder to counterfeit, but not immediately to withdraw from circulation all of the old-style currency. This policy is analyzed in a random matching model of money, and its potential to decrease counterfeiting in the long run...

This essay concerns how the Federal Reserve’s role as a payment services provider can best be aligned with its broad mission to foster the integrity, efficiency, and accessibility of the U.S. payments system. A recommended strategy involves specialization in providing services where the...

In Scott Freeman’s (1996) model, payment system arrangements based on intermediated debt that is settled with money achieve higher welfare than does direct money payment. In a simplified version of Freeman’s model, welfare can be further improved and efficiency achieved by a monetary...

The way many dictators have been deposed in the 20th century resembles the way a parliamentary form of government emerged in 13th-century England. This medieval example is worth examining because the features that led to its political reform are particularly clear. Despite what many think, that...