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Intermediary Cost and Coexistence Puzzle

  • Young Sik Kim

    ()

    (Department of Economics Seoul National University, Seoul, South Korea)

  • Manjong Lee

    ()

    (Department of Economics, Korea University, Seoul, South Korea)

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The coexistence puzzle is explained via an interaction between intermediary cost and uncertainty on consumption trade. If the trade opportunity as a buyer is more likely to arise, ex-ante net return on bond at the margin would be negative up to a certain amount of transaction and, therefore, agents are willing to hold money in the presence of interest-bearing bond.

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1103.pdf
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 1103.

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Date of creation: 2011
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Handle: RePEc:iek:wpaper:1103
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