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Inflation Risk, Settlement Cycles, and Monetary Policy

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  • Hyung Sun Choi

    (Kyung Hee University)

Abstract

A monetary model is constructed to explore the risk-sharing role of multiple installment payments for credit settlement against inflation risk when the choice of cash and credit is endogenous. Economic individuals acquire liquidity for cash consumption and credit settlement. In equilibrium, the choice of a debt rollover may adjust the demand for liquidity in credit settlement to dampen consumption loss. Welfare benefits result from inflation. The optimal money growth is positive with a zero nominal interest rate and a one-period settlement cycle.

Suggested Citation

  • Hyung Sun Choi, 2018. "Inflation Risk, Settlement Cycles, and Monetary Policy," Korean Economic Review, Korean Economic Association, vol. 34, pages 267-282.
    • Handle: RePEc:kea:keappr:ker-20180701-34-2-07
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    References listed on IDEAS

    as
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    Cited by:

    1. Hyung Sun Choi, 2021. "Payments Systems, Liquidity, Collateral, and Central Banking," Korean Economic Review, Korean Economic Association, vol. 37, pages 65-84.
    2. Hyung Sun Choi, 2023. "Payment Systems, Multiple Types of Collateral, Banking, and Collateral Policy," Korean Economic Review, Korean Economic Association, vol. 39, pages 469-493.

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    More about this item

    Keywords

    Money; Credit; Settlement; Inflation; Monetary Policy;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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