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On the complementarity of money and credit

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  • Ferraris, Leo

Abstract

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.

Suggested Citation

  • Ferraris, Leo, 2010. "On the complementarity of money and credit," European Economic Review, Elsevier, vol. 54(5), pages 733-741, July.
    • Handle: RePEc:eee:eecrev:v:54:y:2010:i:5:p:733-741
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    References listed on IDEAS

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    Cited by:

    1. Athanasios Geromichalos & Juan M. Licari & Jose Suarez-Lledo, 2019. "Illiquid Financial Markets and Monetary Policy," Papers 1909.01889, arXiv.org.
    2. Maciej Ryczkowski, 2020. "Money and credit during normal times and house price booms: evidence from time-frequency analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(4), pages 835-861, November.
    3. Mei Dong, 2009. "Money and Costly Credit," 2009 Meeting Papers 404, Society for Economic Dynamics.
    4. Alin OPREANA & Simona VINEREAN, 2015. "Analysis of the Economic Research Context after the Outbreak of the Economic Crisis of 2007-2009," Expert Journal of Economics, Sprint Investify, vol. 3(1), pages 77-92.

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    Keywords

    Coexistence of money and credit;

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