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Money, Credit, And Limited Participation

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  • Choi, Hyung Sun

Abstract

An asset market segmentation model is constructed to study the distributional effects of monetary policy when economic individuals can choose means of payment among alternatives. In equilibrium, monetary policy has two distributional effects: a direct effect and an indirect effect through the choice of means of payment. When the government injects money, some purchase a greater variety of goods with cash whereas others purchase a greater variety of goods with credit. Credit can dampen fluctuations in consumption arising from monetary policy. The optimal money growth rate can be positive or negative. The Friedman rule is not optimal in general.

Suggested Citation

  • Choi, Hyung Sun, 2011. "Money, Credit, And Limited Participation," Macroeconomic Dynamics, Cambridge University Press, vol. 15(5), pages 616-655, November.
    • Handle: RePEc:cup:macdyn:v:15:y:2011:i:05:p:616-655_00
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    Cited by:

    1. Choi, Hyung Sun, 2014. "Money, credit, risk of loss, and limited participation," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 9-23.
    2. Fischer, Andreas M., 2014. "Immigration And Large Banknotes," Macroeconomic Dynamics, Cambridge University Press, vol. 18(4), pages 899-919, June.
    3. Choi, Hyung Sun, 2023. "Money, payments systems, limited participation, and central banking," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    4. Choi, Hyung Sun, 2013. "Money and risk of loss in an asset market segmentation model," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 146-155.
    5. Choi, Hyung Sun, 2015. "Monetary policy, endogenous transactions, and financial market segmentation," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 234-251.
    6. Hazra, Devika, 2018. "Distributional role of monetary policy under limited credit access," Research in Economics, Elsevier, vol. 72(4), pages 494-510.

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