104–136; the analysis builds on the search theoretic environment of Kiyotaki, N. and R. Wright (1996), “On Money as a Medium of Exchange” Journal of Political Economy 97, pp. 927–954; and Trejos, A. and Wright, R. (1995). “Search, Bargaining, Money and Prices,” Journal of Political Economy 103, pp. 118–141). They show that a social optimum requires note issue by banks.
In addition, those notes are used in trade among the agents whose trading histories are private. In their environment, a social optimum requires inside money.