We provide a rationale for bank money creation in our current monetary system by investigating its merits over a system with banks as intermediaries of loanable funds. The latter system could result when CBDCs are introduced. In the loanable funds system, households limit banks' leverage ratios...

This paper investigates the implications of the Grossman-Stiglitz (1980) model on the informational efficiency of financial markets for the optimality of the allocation of talent to financial trading versus entrepreneurship. Informed traders make the financial market more informationally...

When politicians have lower discount factors than voters, democratic elections cannot sufficiently motivate politicians to undertake long-term socially beneficial projects. When politicians can offer incentive contracts which become effective upon reelection, the hierarchy of contracts and...