On the Complementarity of Money and Credit Articles uri icon

authors

  • FERRARIS, LEO

publication date

  • July 2010

start page

  • 733

end page

  • 741

issue

  • 5

volume

  • 54

international standard serial number (ISSN)

  • 0014-2921

electronic international standard serial number (EISSN)

  • 1873-572X

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.