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On the complementarity of money and credit

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  • Ferraris, Leo

Abstract

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.

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  • Ferraris, Leo, 2010. "On the complementarity of money and credit," European Economic Review, Elsevier, vol. 54(5), pages 733-741, July.
    • Handle: RePEc:eee:eecrev:v:54:y:2010:i:5:p:733-741
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    References listed on IDEAS

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    Cited by:

    1. Athanasios Geromichalos & Juan M. Licari & Jose Suarez-Lledo, 2019. "Illiquid Financial Markets and Monetary Policy," Papers 1909.01889, arXiv.org.
    2. Mei Dong, 2009. "Money and Costly Credit," 2009 Meeting Papers 404, Society for Economic Dynamics.
    3. Maciej Ryczkowski, 2020. "Money and credit during normal times and house price booms: evidence from time-frequency analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(4), pages 835-861, November.
    4. Alin OPREANA & Simona VINEREAN, 2015. "Analysis of the Economic Research Context after the Outbreak of the Economic Crisis of 2007-2009," Expert Journal of Economics, Sprint Investify, vol. 3(1), pages 77-92.

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    Keywords

    Coexistence of money and credit;

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