Banks and financial markets in microfounded models of money

This dissertation provides novel perspectives on economic phenomena related to the role of banks and financial markets by taking into account that such institutions create or redistribute assets that serve as payment instruments. To do so, the dissertation develops a series of microfounded models of money that adhere to the new monetarist tradition.
The first part of the dissertation focuses on the creation of money-like assets by private intermediaries, such as banks. Chapter 2 investigates how an economy characterized by private money creation can be subject to self-fulfilling financial
crises and recessions. Chapter 3 studies how the risk embedded in credit extension by banks can affect economic outcomes through the fact that credit extension and deposit creation are two sides of the same coin.
The second part of the dissertation focuses on the current monetary policy
environment, characterized by historically low nominal interest rates. Chapter
4 shows that the ability of financial markets to achieve a favorable distribution
of savings is impaired when nominal interest rates are at the zero lower bound.
Chapter 5 considers how optimal monetary policy depends on different types of
heterogeneity across households and how this can push an economy towards or
away from the zero lower bound.