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dc.contributor.authorDong, Meien_US
dc.date.accessioned2011-02-23en_US
dc.date.accessioned2011-12-15T12:55:47Z-
dc.date.available2011-12-15T12:55:47Z-
dc.date.issued2011en_US
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_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2011,7en_US
dc.subject.jelE41en_US
dc.subject.jelE50en_US
dc.subject.ddc330en_US
dc.subject.keywordCredit and credit aggregatesen_US
dc.subject.keywordInflationen_US
dc.subject.keywordcosts and benefitsen_US
dc.subject.stwGeldwirtschaften_US
dc.subject.stwKrediten_US
dc.subject.stwInflationen_US
dc.subject.stwZahlungsverkehren_US
dc.subject.stwGeldtheorieen_US
dc.titleMoney and costly crediten_US
dc.typeWorking Paperen_US
dc.identifier.ppn647210606en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Bank of Canada Working Papers

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