Transaction Costs and the Use of Cash and Credit

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Transaction Costs and the Use of Cash and Credit

Author Info

Schreft, S L

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Stacey L Schreft

Abstract

An overlapping generations model with spatial separation and transaction costs is developed that displays steady state equilibria in which both cash (fiat currency) and trade credit are used in exchange. Equilibria in which trade credit is used are not Pareto optimal. The question of the optimal quantity of money is addressed. Deflation is found to be optimal, contrary to the result for standard overlapping generations environments.

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Article provided by Springer in its journal Economic Theory.

Volume (Year): 2 (1992)
Issue (Month): 2 (April)
Pages: 283-96
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Handle: RePEc:spr:joecth:v:2:y:1992:i:2:p:283-96

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Edward J. Green, 2002. "Payment Arrangements and Inflation," American Economic Review, American Economic Association, vol. 92(2), pages 51-57, May. [Downloadable!]
William B. English, 1996. "Inflation and financial sector size," Finance and Economics Discussion Series 96-16, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Jeffrey M. Lacker, 1997. "Clearing, settlement, and monetary policy," Working Paper 97-01, Federal Reserve Bank of Richmond. [Downloadable!]
Other versions:
- Lacker, Jeffrey M., 1997. "Clearing, settlement and monetary policy," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 347-381, October. [Downloadable!] (restricted)
Edward J. Green, 2001. "Central banking and the economics of information," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 28-37. [Downloadable!]
Hugo Rodriguez Mendizabal, 2004. "The Behavior of Money velocity in Low and High Inflation Countries," UFAE and IAE Working Papers 600.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
Stacey L. Schreft, 2006. "How and why do consumers choose their payment methods?," Research Working Paper RWP 06-04, Federal Reserve Bank of Kansas City. [Downloadable!]
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- Stacey L. Schreft, 2005. "How and why do consumers choose their payment methods?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston. [Downloadable!]
Aleksander Berentsen & Mariana Rojas Breu & Shouyong Shi, 2009. "Liquidity, innovation and growth," IEW - Working Papers iewwp441, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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- Aleksander Berentsen & Mariana Rojas Breu & Shouyong Shi, 2009. "Liquidity, Innovation and Growth," Working Papers tecipa-371, University of Toronto, Department of Economics. [Downloadable!]
Andrés Erosa & Gustavo Ventura, 2000. "On Inflation as a Regressive Consumption Tax," UWO Department of Economics Working Papers 20001, University of Western Ontario, Department of Economics. [Downloadable!]
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- Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May. [Downloadable!] (restricted)
Scott Freeman & Finn Kydland, 1998. "Monetary aggregates and output," Working Paper 9813, Federal Reserve Bank of Cleveland. [Downloadable!]
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- Scott Freeman & Finn E. Kydland, 1998. "Monetary aggregates and output," Working Papers 1998-013, Federal Reserve Bank of St. Louis. [Downloadable!]
- Scott Freeman & Finn E. Kydland, 2000. "Monetary Aggregates and Output," American Economic Review, American Economic Association, vol. 90(5), pages 1125-1135, December. [Downloadable!] (restricted)
Burkhard Heer & Alfred Maussner & Paul McNelis, 2006. "The money-age distribution: Empirical facts and economic modelling," Computing in Economics and Finance 2006 191, Society for Computational Economics. [Downloadable!]
S.L. Schreft, 1991. "Welfare-improving credit controls," Working Paper 91-01, Federal Reserve Bank of Richmond. [Downloadable!]
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- Schreft, Stacey L., 1992. "Welfare-improving credit controls," Journal of Monetary Economics, Elsevier, vol. 30(1), pages 57-72, October. [Downloadable!] (restricted)
Burkhard Heer & Alfred Maussner & Paul D. McNelis, 2007. "The Money-Age Distribution: Empirical Facts and Limited Monetary Models," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Telyukova, Irina A., 2009. "Household Need for Liquidity and the Credit Card Debt Puzzle," MPRA Paper 6674, University Library of Munich, Germany. [Downloadable!]
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- Irina Telyukova, 2008. "Household Need for Liquidity and the Credit Card Debt Puzzle," University of California at San Diego, Economics Working Paper Series 2008-01, Department of Economics, UC San Diego. [Downloadable!]
Stacey L. Schreft & Bruce D. Smith, 1999. "The evolution of cash transactions : some implications for monetary policy," Research Working Paper 99-02, Federal Reserve Bank of Kansas City. [Downloadable!]
Other versions:
- Stacey L. Schreft & Bruce D. Smith, 1997. "The evolution of cash transactions: some implications for monetary policy," Financial Services working paper 97-04, Federal Reserve Bank of Cleveland. [Downloadable!]
- Schreft, Stacey L. & Smith, Bruce D., 2000. "The evolution of cash transactions: Some implications for monetary policy," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 97-120, August. [Downloadable!] (restricted)
Hugo Rodríguez, 1998. "The Variability of Money Velocity in a Generalized Cash-in-Advance Model," Economics Working Papers 320, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
S. Rao Aiyagari & R. Anton Braun & Zvi Eckstein, 1998. "Transaction services, inflation, and welfare," Staff Report 241, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- Aiyagari, S.R. & Braum, T. & Eckstein, Z., 1995. "Transaction Services, Inflation and Welfare," Papers 27-95, Tel Aviv - the Sackler Institute of Economic Studies.
- S. Rao Aiyagari & R. Anton Braun & Zvi Eckstein, 1995. "Transaction services, inflation, and welfare," Working Papers 551, Federal Reserve Bank of Minneapolis. [Downloadable!]
- S. Rao Aiyagari & R. Anton Braun & Zvi Eckstein, 1998. "Transaction Services, Inflation, and Welfare," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1274-1301, December. [Downloadable!] (restricted)

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