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Consumption and the Means of Payment: An Empirical Analysis for the United Kingdom

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  • Jayasri Dutta
  • Martin Weale

Abstract

We estimate a model of consumption and money holdings with multiple means of payment, using data for the United Kingdom. The model describes a technology for transactions, where money and credit are imperfect substitutes. It allows us to identify shocks to the transactions technology. We evaluate the value of long‐term changes in the payments systems to the representative consumer, as well as the welfare cost of inflation from 1977 to 1998. The estimates allow us to evaluate the welfare costs of inflation of this period. The model also has implications for consumption‐smoothing in response to monetary shocks.

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  • Jayasri Dutta & Martin Weale, 2001. "Consumption and the Means of Payment: An Empirical Analysis for the United Kingdom," Economica, London School of Economics and Political Science, vol. 68(271), pages 293-316, August.
    • Handle: RePEc:bla:econom:v:68:y:2001:i:271:p:293-316
    DOI: 10.1111/1468-0335.00248
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    Cited by:

    1. Markose, Sheri M & Loke, Yiing Jia, 2002. "Can cash hold its own? International comparisons: Theory and evidence," Economics Discussion Papers 3734, University of Essex, Department of Economics.
    2. Rua, António, 2018. "Modelling currency demand in a small open economy within a monetary union," Economic Modelling, Elsevier, vol. 74(C), pages 88-96.
    3. Constanza Martínez Ventura, 2019. "The use of cash and debit cards as payment instruments in Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 90, pages 71-95, Enero - J.
    4. Martínez Ventura, Constanza, 2019. "El uso de efectivo y tarjetas débito como instrumentos de pago en Colombia," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 90, pages 71-95, January.
    5. Tomas Havranek & Anna Sokolova, 2016. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 130 Studies Say "Probably Not"," Working Papers 2016/08, Czech National Bank.

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