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Consumption and the means of payment: an empirical analysis for the United Kingdom



In this paper the authors specify and estimate a model of consumption and cash holdings with multiple means of payment, using data for the United Kingdom. The model describes a technology for transactions, where cash and credit are imperfect substitutes in paying for consumption expenditure. The model allows the identification of the parameters of, and shocks to, the transactions technology. The value of long-term changes in the payments systems to the representative consumer, as well as the welfare cost of inflation from 1920 to 1990 are evaluated. The cash-in-advance model is equivalent to a parametric restriction on the technology, which is rejected by the data.

Suggested Citation

  • Dr Martin Weale, 1997. "Consumption and the means of payment: an empirical analysis for the United Kingdom," National Institute of Economic and Social Research (NIESR) Discussion Papers 114, National Institute of Economic and Social Research.
  • Handle: RePEc:nsr:niesrd:223

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    References listed on IDEAS

    1. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 99-125.
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    4. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    5. Fischer, Andreas M., 1990. "Cointegration and I(0) measurement error bias," Economics Letters, Elsevier, vol. 34(3), pages 255-259, November.
    6. Li, Yikang & Maddala, G. S. & Rush, Mark, 1995. "New small sample estimators for cointegration regression: Low-pass spectral filter method," Economics Letters, Elsevier, vol. 47(2), pages 123-129, February.
    7. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
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    Cited by:

    1. Markose, Sheri M & Loke, Yiing Jia, 2002. "Can cash hold its own? International comparisons: Theory and evidence," Economics Discussion Papers 3734, University of Essex, Department of Economics.

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