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Payment Systems


  • James McAndrews

    () (Federal Reserve Bank of New York, New York, NY 10045-0001)

  • Ed Nosal

    () (Federal Reserve Bank of Chicago, Chicago, Illinois 60604)

  • Guillaume Rocheteau

    () (University of California, Irvine, California 92697-5100)


Modern payment instruments can be complex. Yet, many of these can be interpreted as a form of money or credit, which are rather primitive instruments. We use a simple model of a monetary economy to provide an overview of some of the fundamental questions in the literature on payments. Why do agents pay? What are the frictions that prevent or limit the use of credit arrangements? Why is fiat money valued? Why do money and credit coexist? Our simple model can address these basic and important questions, and can be extended to address a variety of issues related to payments.

Suggested Citation

  • James McAndrews & Ed Nosal & Guillaume Rocheteau, 2011. "Payment Systems," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 259-287, December.
  • Handle: RePEc:anr:refeco:v:3:y:2011:p:259-287

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    Cited by:

    1. Hanes, Christopher & Rhode, Paul W., 2013. "Harvests and Financial Crises in Gold Standard America," The Journal of Economic History, Cambridge University Press, vol. 73(01), pages 201-246, March.
    2. J├╝rgen Bott, 2009. "The Single Euro Payments Area: New Alliances Required to Tip the Market," ECRI Papers 1693, Centre for European Policy Studies.

    More about this item


    money; credit; liquidity;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System


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