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Money and Costly Credit

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  • Mei Dong

    (Simon Fraser University)

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Abstract

evidence. Compared to an economy without credit, allowing credit as a means of payment has three implications: [1] it lowers money demand at low to moderate inflation rates; [2] it improves society's welfare when the inflation rate exceeds a specific threshold; and [3] it can raise the welfare cost of inflation for some reasonable values of the credit cost parameter.

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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 404.

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Date of creation: 2009
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Handle: RePEc:red:sed009:404

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  1. Bullard, James & Keating, John W., 1995. "The long-run relationship between inflation and output in postwar economies," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 477-496, December.
  2. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
  3. S. Rao Aiyagari & R. Anton Braun & Zvi Eckstein, 1995. "Transaction services, inflation, and welfare," Working Papers 551, Federal Reserve Bank of Minneapolis.
  4. Irina A. Telyukova & Randall Wright, 2006. "A Model of Money and Credit, with Application to the Credit Card Debt Puzzle," 2006 Meeting Papers 45, Society for Economic Dynamics.
  5. Sun, Hongfei, 2007. "Banking, Inside Money and Outside Money," MPRA Paper 4504, University Library of Munich, Germany.
  6. John V. Duca & William C. Whitesell, 1991. "Credit cards and money demand: a cross-sectional study," Research Paper 9112, Federal Reserve Bank of Dallas.
  7. Freeman, Scott & Huffman, Gregory W, 1991. "Inside Money, Output, and Causality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 645-67, August.
  8. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. Williamson, Stephen & Sanches, Daniel, 2009. "Money and Credit With Limited Commitment and Theft," MPRA Paper 20690, University Library of Munich, Germany.
  10. Ferraris, Leo, 2010. "On the complementarity of money and credit," European Economic Review, Elsevier, vol. 54(5), pages 733-741, July.
  11. Aleksander Berentsen & Gabriele Camera & Christopher Waller, 2005. "Money, Credit and Banking," CESifo Working Paper Series 1617, CESifo Group Munich.
  12. Lacker, Jeffrey M. & Schreft, Stacey L., 1996. "Money and credit as means of payment," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 3-23, August.
  13. Miquel Faig & Belén Jerez, 2007. "Precautionary Balances and the Velocity of Circulation of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 843-873, 06.
  14. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
  15. David C. Mills, Jr., 2006. "A model in which outside and inside money are essential," Finance and Economics Discussion Series 2006-38, Board of Governors of the Federal Reserve System (U.S.).
  16. John Boyd & Bruce Champ, 2003. "Inflation and financial market performance: what have we learned in the last ten years," Working Paper 0317, Federal Reserve Bank of Cleveland.
  17. Klee, Elizabeth, 2008. "How people pay: Evidence from grocery store data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 526-541, April.
  18. Monnet, Cyril & Roberds, William, 2008. "Optimal pricing of payment services," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1428-1440, November.
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Cited by:
  1. Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: models," Staff Report 443, Federal Reserve Bank of Minneapolis.
  2. Ferraris, Leo, 2010. "On the complementarity of money and credit," European Economic Review, Elsevier, vol. 54(5), pages 733-741, July.
  3. S. Boragan Aruoba & Christopher J. Waller & Randall Wright, 2007. "Money and capital," Working Paper 0714, Federal Reserve Bank of Cleveland.
  4. Mariana Rojas Breu, 2013. "The Welfare Effect Of Access To Credit," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 235-247, 01.
  5. S. Boragan Aruoba & Christopher J. Waller & Randall Wright, 2009. "Money and capital: a quantitative analysis," Working Papers 2009-031, Federal Reserve Bank of St. Louis.

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