Modeling -- Foundation -- A model economy -- What is money? -- Money and the level of economic well-being -- Money in a classical economy -- Money in a Keynesian economy -- Should monetary policy be active? -- Is monetary policy active? -- Measuring monetary services -- Organizing the production...

The nineteenth-century economist Walter Bagehot maintained that in order to prevent bank panics, a central bank should provide liquidity at a very high rate of interest. However, most of the theoretical literature on liquidity provision suggests that central banks should lend at an interest rate...

Monetary policy has traditionally been viewed as theprocess by which a central bank uses its influence overthe supply of money to promote its economic objectives. Forexample, Milton Friedman (1959, p. 24) defined the tools ofmonetary policy to be those “powers that enable the [FederalReserve]...

In this paper, we argue that the observed di¤erence in the cost of intraday and overnightliquidity is part of an optimal payments system design. In our environment, the interestcharged on overnight liquidity a¤ects output while the cost of intraday liquidity onlyaffects the distribution of...

This paper studies a overlapping generations economy with capital where limitedcommunication and stochastic relocation create an endogenous transactions role for…at money. We assume a production function with a knowledge-externality (Romer-style) that nests economies with endogenous growth (AK...

The Friedman rule, a widely studied prescription for monetary policy, is optimal inTownsend’s turnpike model of money; it is not so in the overlapping generations versionof his stochastic relocation model of money. We investigate these monetary models inthe light of this disparity. To that...