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Intermediary Cost and Coexistence Puzzle

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  • Young Sik Kim

    ()
    (Department of Economics Seoul National University, Seoul, South Korea)

  • Manjong Lee

    ()
    (Department of Economics, Korea University, Seoul, South Korea)

Abstract

The coexistence puzzle is explained via an interaction between intermediary cost and uncertainty on consumption trade. If the trade opportunity as a buyer is more likely to arise, ex-ante net return on bond at the margin would be negative up to a certain amount of transaction and, therefore, agents are willing to hold money in the presence of interest-bearing bond.

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Bibliographic Info

Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 1103.

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Date of creation: 2011
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Handle: RePEc:iek:wpaper:1103

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Keywords: intermediary cost; interest-bearing asset; coexistence puzzle;

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Cited by:
  1. Lee, Manjong, 2013. "Coexistence and welfare cost of inflation," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 23-32.

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