The main goal of this essay is to provide microfoundations in a spatial general equilibrium framework for the fact that individuals use money to make transactions, and hence microfoundations for the cash in advance constraint. We analyze the emergence of a monetary economy out of a...

We make a distinction between centralized, decentralized, and distributed payment mechanisms. A centralized payment mechanism processes a transaction using a trusted third party. A decentralized payment mechanism processes a transaction between the parties to the transaction. A distributed...

Can competition work among privately issued fiat currencies such as Bitcoin or Ethereum? Only sometimes. To show this, we build a model of competition among privately issued fiat currencies. We modify the current workhorse of monetary economics, the Lagos-Wright environment, by including...

Can competition among privately issued at currencies such as Bitcoin or Ethereum work? Only sometimes. To show this, we build a model of competition among privately issued at currencies. We modify the current workhorse of monetary economics, the Lagos-Wright environment, by including...