Money, Payments, and Liquidity, Second Edition

Money, Payments, and Liquidity, Second Edition

By Guillaume Rocheteau and Ed Nosal

A new edition of a book presenting a unified framework for studying the role of money and liquid assets in the economy, revised and updated.





A new edition of a book presenting a unified framework for studying the role of money and liquid assets in the economy, revised and updated.

In Money, Payments, and Liquidity, Guillaume Rocheteau and Ed Nosal provide a comprehensive investigation into the economics of money, liquidity, and payments by explicitly modeling the mechanics of trade and its various frictions (including search, private information, and limited commitment). Adopting the last generation of the New Monetarist framework developed by Ricardo Lagos and Randall Wright, among others, Nosal and Rocheteau provide a dynamic general equilibrium framework to examine the frictions in the economy that make money and liquid assets play a useful role in trade. They discuss such topics as cashless economies; the properties of an asset that make it suitable to be used as a medium of exchange; the optimal monetary policy and the cost of inflation; the coexistence of money and credit; and the relationships among liquidity, asset prices, monetary policy; and the different measures of liquidity in over-the-counter markets.

The second edition has been revised to reflect recent progress in the New Monetarist approach to payments and liquidity. Rocheteau and Nosal have added three new chapters: on unemployment and payments, on asset price dynamics and bubbles, and on crashes and recoveries in over-the-counter markets. The chapter on the role of money has been entirely rewritten, adopting a mechanism design approach. Other chapters have been revised and updated, with new material on credit economies under limited commitment, open-market operations and liquidity traps, and the limited pledgeability of assets under informational frictions.


$50.00 X ISBN: 9780262533270 504 pp. | 6 in x 9 in 110 figures


  • This clearly written and carefully crafted book identifies fundamental questions that a good theory of money should be designed to answer, then offers convincing examples of insights about practical problems borne by their theory. The authors' status as leading creators of the tools that they describe so well comes through clearly in the conviction and clarity with which they write good economics.

    Thomas Sargent

    New York University

  • A terrific book on modern monetary theory that guides students right up to the research frontier where monetary economics and finance have joined forces to deliver an exciting new approach to asset valuation with frictions.

    Martin Schneider

    Professor of Economics, Stanford University

  • This is state-of-the-art economics—the topics are important and interesting, the microfoundations constitute the very best of research in macro and monetary theory, and the presentation is first rate. I read and taught from the first edition, and it was always a tremendous resource for both teacher and student. The second edition has made some of the previous material even better, and includes several very important developments made over the last few years. I highly recommend this book to anyone who is serious about macro, finance, and monetary economics.

    Randall Wright

    Ray Zemon Professor of Liquid Assets, University of Wisconsin, Madison