Money, Credit, and Opportunity Costs
Publisher : Korea Insurance Research Institute
Research Area : Business Management
-
A cash-in-advance model of multiple means of payment is constructed to study the coexistence of multiple means of payment and the effects of opportunity costs and monetary policy. In steady state equilibrium, if the opportunity cost of credit, transactions cost, increases, people hold more cash and use it for a greater variety of goods. Next, if the money growth rate decreases, then the opportunity cost of money, the nominal interest rate, decreases and people use cash for a greater variety of goods. To improve welfare, the government needs to decrease the money stock in order to avoid opportunity costs and the Friedman rule is optimal.
-
[journal] Aiyagari, R. S / 1998 / Transaction Services, Inflation,and Welfare / Journal of Political Economics 106 (6) : 1274~1301
[report] Alvarez, F. / 2001 / Interest Rates and Inflation / Federal Reserve Bank of Minneapolis
[journal] Becker, G / 1968 / Crime and Punishment: An Economic Approach / Journal of PoliticalEconomics 76 (2) : 169~217
[journal] Cooley, T.F / 1989 / The inflation tax in a real business cycle model / American Economic Review 79 (4) : 733~747
[journal] Dotsey, M / 1996 / The welfare cost of inflation in general equilibrium / ”,Journal of Monetary Economics 37 (1) : 29~47
[journal] Freeman, S. / 1996 / The Spatial Concentration ofCrime / Journal of Urban Economics 40 (2) : 216~231
[journal] Gillman, M. / 1993 / The welfare cost of inflation in a cash-in-advance economy withcostly credit / Journal of Monetary Economics 31 (1) : 97~116
[journal] He, P., Huang L / 2005 / Money and Banking in Search Equilibrium / International Economic Review 46 (2) : 637~670
[report] He, P. / 2008 / Money, Banking, and Monetary Policy
[journal] Ireland, P. N. / 1994 / Money and Growth: An Alternative Approach / AmericanEconomic Review 84 (1) : 47~65
[journal] Lacker, J. M / 1996 / Money and credit as means of payment / Journal of Monetary Economics 38 (1) : 3~23
[journal] Levitt, S / 2004 / Understanding why crime fell in the 1990s: four factors that explainthe decline and six that do not / Journal of Economic Perspective 18 (1) : 163~190
[journal] Lucas, R. / 1990 / Equilibrium in a Pure Currency Economy / Economic Inquiry 18 (2) : 203~220
[journal] Lucas, R. E / 1987 / Money and interest in a cash-in-advanceeconomy / Econometrica 55 (3) : 491~513
[book] Prescott, E. C. / 1987 / A Multiple Means-of-Payment Model / Cambridge University Press : 42~51
[journal] Ryu, B. H. / 2007 / An Analysis of the Demand for Cash in Korea / Economic Papers 13 (1) : 150~179
[report] Schuh, S / 2009 / Why Are (Some) Consumers (Finally) Writing FewerChecks? The Role of Payment Characteristics / Federal Reserve Bank of Boston
[journal] Whitesell, W. C. / 1989 / The Demand for Currency versus Debitable Accounts: Note / Journal of Money, Credit, and Banking 21 (2) : 246~251
-
91
Viewed
Print this page
Download PDF