A previous version of this working paper was originally published in February 2019.

In our framework, intermediaries hold reserves across periods to take advantage of rediscounting opportunities, and monetary policy influences the equilibrium allocation through the interest rate on reserves. We characterize the conditions for the existence of an allocation in which privately issued debt claims are not discounted in equilibrium. We also discuss the role of monetary policy in the payments system across different market structures in the intermediary sector and characterize the minimum size of the intermediary sector required to attain efficiency.