Intermediary cost and coexistence puzzle

초록

The coexistence puzzle is explained via an interaction between intermediary cost and uncertainty with regards to consumption trade. If a trade opportunity as a buyer is more likely to arise, ex-ante net return on bond at the margin would be negative up to a certain amount of transactions and, therefore, agents are willing to hold money in the presence of an interest-bearing bond. (C) 2012 Elsevier B.V. All rights reserved.

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