Payment Systems

Posted: 10 Jan 2012

See all articles by James McAndrews

James McAndrews

Wharton Financial Institutions Center

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Guillaume Rocheteau

Federal Reserve Bank of Cleveland; National University of Singapore (NUS)

Date Written: December 2011


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

McAndrews, James and Nosal, Ed and Rocheteau, Guillaume, Payment Systems (December 2011). Annual Review of Financial Economics, Vol. 3, pp. 259-287, 2011, Available at SSRN: or

James McAndrews (Contact Author)

Wharton Financial Institutions Center ( email )

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States
9176090086 (Phone)
19104 (Fax)

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Guillaume Rocheteau

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228

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