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Inflation, credit, and indexed unit of account
- Authors
- Choi, Hyung Sun; Kwon, Ohik; Lee, Manjong
- Issue Date
- 1월-2016
- Publisher
- ELSEVIER
- Keywords
- Indexed unit of account; Deferred payment; Inflation; Welfare
- Citation
- INTERNATIONAL REVIEW OF ECONOMICS & FINANCE, v.41, pp.144 - 154
- Indexed
- SSCI
SCOPUS
- Journal Title
- INTERNATIONAL REVIEW OF ECONOMICS & FINANCE
- Volume
- 41
- Start Page
- 144
- End Page
- 154
- ISSN
- 1059-0560
- Abstract
- A simple monetary model is constructed to study the implications of an indexed unit of account (INDEXED-UOA). In an economy with an INDEXED-UOA, the credit-trade friction attributed to inflation can be resolved and unexpected inflation causes no redistribution effect between debtors and creditors. However, in an economy without an INDEXED-UOA, credit trades occur only if inflation is not too high and unexpected inflation renders debtors better off, but creditors worse off. In a high-inflation economy, money is used as a unit of account for spot trades only and an INDEXED-UOA emerges as a unit of account for deferred-payment trades. (c) 2015 Elsevier Inc All rights reserved.
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