A major concern in modern monetary theory is the construction of tractable models where money is essential. Lagos and Wright (2005) pioneered a class of models that address this concern. The key ingredient of the Lagos–Wright framework is that trade alternates between centralized and decentralized markets. In this paper, unlike the previous literature, we explicitly model the process of exchang...

With the adoption of blockchain technology, initiatives to provide financial, investment and insurance services a wide range users in decentralized manner have emerged. But can finance be alternative traditional financial system, or has it only created another technology playground for who are biasedly enthusiastic about crypto-assets? The study examines key definitions then synthesizes them fo...

The framework in Lagos and Wright (2005) combining decentralized and centralized markets is used extensively in monetary economics, for several reasons: it has relatively solid microfoundations; it is tractable; it integrates naturally with other theories; and it is easily quantifiable. Much is known about this model, but there is one loose end: only under very special assumptions about bargain...

This paper reports findings from an experiment that implements the Lagos-Wright (2005) model of monetary exchange. We find that subjects generally avoid the autarkic equilibrium of that model and make trading decisions consistent with the model’s monetary equilibrium. Aliprantis, Camera and Puzzello (ACP, 2007) show that providing periodic access to centralized markets as in the Lagos and Wrigh...

We develop a model of decentralized monetary exchange that can be used to examine the distributional effects of inflation across heterogeneous agents who have private information. The private information can be about the productivity, preferences, or money holdings of the agents. Matching is multilateral and each seller is visited by a stochastic number of buyers. The good is allocated accordin...

We explore the extent to which money improves the efficiency of resource allocations in an economy with decentralized trade and no commitment with respect to future actions. We assume that all agents, with the exception of a subset with measure ε > 0, are completely anonymous and that all actions in meetings involving these agents are private. We obtain that, for any ε > 0, as long as agents ar...

Governments are present-biased toward spending. Fiscal rules are deficit limits that trade off commitment to not overspend and flexibility to react to shocks. We compare centralized rules — chosen jointly by all countries — to decentralized rules. If governments’ present bias is small, centralized rules are tighter than decentralized rules: individual countries do not internalize the redistribu...

This paper offers a classification of credit markets in transition economies. It describes a continuum of systems by identifying its polar cases: countries where the entire financial system still relies on outside money, mostly republics of the former Soviet Union; and those where a more decentralized intermediation system is developing (Central/Eastern Europe). We believe that different outcom...

This paper sets up a matching (decentralized trade) model with a technology that allows each pair of agents to report the transfer of goods in the end of each pairwise meeting. It examines (a) conditions under which an allocation that can be supported as an equilibrium allocation, and (b) whether the report system can replace money. JEL Classification: E40

We study two dynamic models of payments systems. The ...rst is a deterministic model with spatial separation where we consider alternative payments systems institutions and their implications for allocation and welfare. A payments system with period-by-period settlement in outside money improves on decentralized exchange using currency by reducing average cash balances and the average holding p...