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On the complementarity of money and credit

  • Ferraris, Leo

I propose a model where agents choose to conduct their business using two payment instruments, money and bilateral credit. A friction in the timing of transactions rationalizes the use of both instruments and makes it optimal for agents to use money as a means of settlement for credit. Money and credit complement each other. With anticipated inflation, complementarity implies that the credit to money ratio decreases with inflation.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 5 (July)
Pages: 733-741

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:5:p:733-741
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  1. Orazio Attanasio & Luigi Guiso & Tuillo Jappelli, 1998. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," NBER Working Papers 6593, National Bureau of Economic Research, Inc.
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