We construct a model in which all consolidated government debt is used in transactions, with money being more widely acceptable. When asset market constraints bind, the model can deliver low real interest rates and positive rates of inflation at the zero lower bound. Optimal monetary policy in...

A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium — an upward-sloping nominal yield curve. Purchases of long-maturity government debt by the central bank are always a...

A dynamic model with credit under limited commitment is constructed, in which limited memory can weaken the effects of punishment for default. This creates an endogenous role for government debt in credit markets, and the economy can be non-Ricardian. Default can occur in equilibrium, and...

We study the interplay among imperfect memory, limited commitment, and theft, in an environment that can support monetary exchange and credit. Imperfect memory makes money useful, but it also permits theft to go undetected, and therefore provides lucrative opportunities for thieves. Limited...

A model is constructed in which trading partners are asymmetrically informed about future trading opportunities and where spatial and informational frictions limit arbitrage between markets. These frictions create an inefficiency relative to a full information equilibrium, and the extent of this...

A model of monetary exchange with private financial intermediation is constructed. Claims on financial intermedaries of two types are traded in transactions: circulating notes and deposits. There can be a role for the government in supplying liqudity, and level changes in the money supply...