This paper considers whether eliminating the stock of government debt outstanding would reduce welfare. It models an economy with three assets - currency, government bonds, and storage, a transactions role for money, and a demand for liquidity and thus a role for banks. The Friedman rule is not...

Many claims have been made about the potential benefits, and the potential costs, of adopting a system of universal banking in the United States. We evaluate these claims using a model where there is a moral hazard problem between banks and quot;borrowers,quot; a moral hazard problem between...

We study a monetary, general equilibrium economy in which banks exist because they provide intertemporal insurance to risk-averse depositors. A quot;banking crisisquot; is defined as a case in which banks exhaust their reserve assets. Under different model specifications, the banking industry is...

There is now a substantial theoretical literature arguing that inflation impedes financial deepening. Furthermore, it has been hypothesized that the relationship is a nonlinear one, in that there is a threshold level of inflation below which inflation has a positive effect on financial depth,...

This paper considers three questions: (1) what is the role of financial markets in development, (2) why do some economies have such poorly developed financial markets, and (3) can government policy be used to promote financial market development?

We examine a standard model of capital accumulation in which spatial separation and limited communication create a role for money and shocks to portfolio needs create a role for banks. In this context we examine the existence, multiplicity, and dynamical properties of monetary equilibria with...

We consider a monetary growth model in which banks arise to provide liquidity. In addition, there is a government that issues not only money, but interest-bearing bonds; these bonds compete with capital in private portfolios. When the government fixes a constant growth rate for the money stock,...

We consider issues concerning the design of a banking system quot;safety netquot; when both a deposit insurer and a lender of last resort are present. In our model both entities have a role to play. Moreover, issues related to deposit insurance pricing are relatively unimportant in this context,...