This thesis models frictions that occur in payments and clearing activities and analyzes how payments and clearing arrangements, technologies, and regulatory policies reduce or eliminate such frictions and thus contribute to financial inclusion and financial stability.

The first paper is a theoretical and empirical investigation into the trade-offs between financial inclusion, tax revenues, and the rate of inflation and how this trade-off changes with technologies providing cheaper access to payment services. The second paper theoretically analyses the incentives of a central counterparty and their surviving clearing agents during an auction of the positions of a defaulted clearing agent. The third paper studies how bilateral and central clearing arrangements deal with the moral hazard problem in markets where agents are inclined to promise excessively high contingent future payments in relation to their capital and then subsequently default.