On the complementarity of money and credit

I propose a model where agents choose to conduct their business using two payment instruments, money and bilateral credit. A friction in the timing of transactions rationalizes the use of both instruments and makes it optimal for agents to use money as a means of settlement for credit. Money and cre...

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Veröffentlicht in:European economic review 2010-07, Vol.54 (5), p.733-741
1. Verfasser: Ferraris, Leo
Format: Artikel
Sprache:eng
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Zusammenfassung:I propose a model where agents choose to conduct their business using two payment instruments, money and bilateral credit. A friction in the timing of transactions rationalizes the use of both instruments and makes it optimal for agents to use money as a means of settlement for credit. Money and credit complement each other. With anticipated inflation, complementarity implies that the credit to money ratio decreases with inflation.
ISSN:0014-2921
1873-572X
DOI:10.1016/j.euroecorev.2009.12.003