When commitment is lacking, intertemporal trade is facilitated with the use of exchange media--interpreted broadly to include monetary and collateral assets. We study the properties of a model commonly used to motivate monetary exchange, extended to include a physical asset whose expected...

A primary concern in monetary economics is whether a purely private monetary regime is consistent with macroeconomic stability. I show that a competitive regime is inherently unstable due to the properties of endogenously determined limits on private money creation. Precisely, there is a...

Markov-switching rational expectations (MSRE) models can bring out fresh insights beyond what linear rational expectations models have done for macroeconomics, as noted and predicted by Davig and Leeper (2007) and Farmer, Waggoner and Zha (2009), among others. However, a lack of tractable...

This paper shows that it is possible to analyze equilibrium inflation determination without any reference to either money supply or demand, as long as one specifies policy in terms of a "Wicksellian" interest-rate feedback rule. The paper's central result is an approximation theorem, showing the...

A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called the banking sector, and no public knowledge of the trading histories of the complement of that subset, called the non bank sector. Each...

This paper documents changes in the cyclical behavior of nominal data series that appear after 1979:Q3 when the Federal Reserve implemented a policy to lower the inflation rate. Such changes were not apparent in real variables. A business cycle model with impulses to technology and a role for...

What are the conditions under which Gresham's Law holds? And what are the mechanics of a debasement? To analyze these questions, we develop a model of commodity money with light and heavy coins, imperfect information, and prices determined via bilateral bargaining. There are equilibria with...

This paper addresses two substantive issues: (1) Does the magnitude of the expectation effect of regime switching in monetary policy depend on a particular policy regime? (2) Under which regime is the expectation effect quantitatively important? Using two canonical DSGE models, we show that...

Output declines may be caused or propagated through the payments system by shortages of the reserves required for the payment of factors of production. Appropriate open market purchases arwe shown able to lower the short run interest rate on liquid assets and relieve the output disruption....

There is wide agreement that currency was not available in conveniently small denominations prior to the 19th century. Here, estimates of the costs of providing and maintaining money (coins) in 15th century Europe and parameterized versions of a matching model of money are used to find the...