Inflation, Credit, and Indexed Unit of Account
A simple monetary model is constructed to study the implications of an indexed unit of account (Indexed-UoA). In an economy with an Indexed-UoA, credit trade friction attributed to inflation is resolved and there is no redistributional effect from unexpected inflation between debtors and creditors. However, in an economy without an Indexed-UoA, credit trades occur only if inflation is not too high and unexpected inflation renders debtors better off but creditors worse off. Adopting a medium of exchange as a unit of account is most apposite for a low-inflation economy, whereas introducing an alternative Indexed-UoA enhances welfare in an economy where inflation undermines credit trades.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: (82-2) 928-4948
Web page: http://econ.korea.ac.kr/~ri
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Young Sik Kim & Manjong Lee, 2013. "Separation of Unit of Account from Medium of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(8), pages 1685-1703, December.
- Robert J. Shiller, 1998.
"Designing Indexed Units of Account,"
Cowles Foundation Discussion Papers
1179, Cowles Foundation for Research in Economics, Yale University.
- Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08.
- Robert J. Shiller, 1997. "Public Resistance to Indexation: A Puzzle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 159-228.
- Narayana R. Kocherlakota, 1996.
"Money is memory,"
218, Federal Reserve Bank of Minneapolis.
When requesting a correction, please mention this item's handle: RePEc:iek:wpaper:1307. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kim, Jisoo)
If references are entirely missing, you can add them using this form.