Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/53783 
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dc.contributor.authorDong, Meien
dc.date.accessioned2011-02-23-
dc.date.accessioned2011-12-15T12:55:47Z-
dc.date.available2011-12-15T12:55:47Z-
dc.date.issued2011-
dc.identifier.pidoi:10.34989/swp-2011-7en
dc.identifier.urihttp://hdl.handle.net/10419/53783-
dc.description.abstractI study an economy in which money and credit coexist as means of payment and the settlement of credit requires money. The model extends recent developments in microfounded monetary theory to address the choice of payment methods and the effects of inflation. Whether a buyer uses money or credit depends on the fixed cost of credit and the inflation rate. In particular, inflation not only makes money less valuable, but also makes credit more expensive because of delayed settlement. Based on quantitative analysis, the model suggests that the relationship between inflation and credit exhibits an inverse U-shape which is broadly consistent with anecdotal evidence. Compared to an economy without credit, allowing credit as a means of payment has three implications: [1] it lowers money demand at low to moderate inflation rates; [2] it improves society's welfare when the inflation rate exceeds a specific threshold; and [3] it can raise the welfare cost of inflation for some reasonable values of the credit cost parameter.en
dc.language.isoengen
dc.publisher|aBank of Canada |cOttawaen
dc.relation.ispartofseries|aBank of Canada Working Paper |x2011-7en
dc.subject.jelE41en
dc.subject.jelE50en
dc.subject.ddc330en
dc.subject.keywordCredit and credit aggregatesen
dc.subject.keywordInflationen
dc.subject.keywordcosts and benefitsen
dc.subject.stwGeldwirtschaften
dc.subject.stwKrediten
dc.subject.stwInflationen
dc.subject.stwZahlungsverkehren
dc.subject.stwGeldtheorieen
dc.titleMoney and costly credit-
dc.typeWorking Paperen
dc.identifier.ppn647210606en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:bca:bocawp:11-7en

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