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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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    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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