Price Rigidity and Means of PaymentPrice Rigidity and Means of Payment
- Other Titles
- Price Rigidity and Means of Payment
- Authors
- 김영식; 이만종
- Issue Date
- 2012
- Publisher
- 서울대학교 경제연구소
- Keywords
- Cash; Debit card; Price rigidity
- Citation
- Seoul Journal of Economics, v.25, no.1, pp.111 - 135
- Indexed
- KCI
- Journal Title
- Seoul Journal of Economics
- Volume
- 25
- Number
- 1
- Start Page
- 111
- End Page
- 135
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/110199
- DOI
- 10.22904/sje.2012.25.1.005
- ISSN
- 1225-0279
- Abstract
- The trade-off between cash and a debit card as a means of payment is incorporated into a search-theoretic model. A buyer incurs the proportional cost of carrying cash into the decentralized goods market, and a seller accepting a debit card bears a fixed record-keeping cost. In an equilibrium, the price of a cash good turns out to be relatively sticky compared with that of a debit-card good. With money supply increasing at a constant rate, the carrying cost of cash proportional to its amount causes the cash balance net of cost to increase at a rate less than the money growth rate. Consumption smoothing also leads to a relatively small decrease in quantity traded in comparison with the increase in cash balance, implying rigid price. Further, the means-of-payment mechanism underlying price rigidity yields an additional distortionary effect of inflation on relative price between cash trade and debit-card trade, which implies higher welfare cost of inflation than that in the standard search-based model.
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Collections - College of Political Science & Economics > Department of Economics > 1. Journal Articles
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