Multiple means of payment, excess reserves, and monetary policy

Hyung Sun Choi; Manjong Lee

Multiple means of payment, excess reserves, and monetary policy

Hyung Sun Choi, Manjong Lee

Department of Economics

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

The effects of choosing between cash and credit as a means of payment on bank’s excess reserves are explored in the proposed model. The model incorporates the widespread recent features of payment patterns and financial services. Results suggest that credit increases excess reserves and generates leeway for banks to invest in interest-bearing assets. Given the growth rate of money, credit transactions increase, but welfare decreases. This phenomenon implies the optimality of the Friedman rule.

Original language	English
Pages (from-to)	5-21
Number of pages	17
Journal	Korean Economic Review
Volume	32
Issue number	1
Publication status	Published - 2016 Jun 1

Keywords

Bank
Credit
Monetary policy
Money
Reserve

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

Cite this

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title = "Multiple means of payment, excess reserves, and monetary policy",

abstract = "The effects of choosing between cash and credit as a means of payment on bank{\textquoteright}s excess reserves are explored in the proposed model. The model incorporates the widespread recent features of payment patterns and financial services. Results suggest that credit increases excess reserves and generates leeway for banks to invest in interest-bearing assets. Given the growth rate of money, credit transactions increase, but welfare decreases. This phenomenon implies the optimality of the Friedman rule.",

keywords = "Bank, Credit, Monetary policy, Money, Reserve",

author = "Choi, {Hyung Sun} and Manjong Lee",

note = "Funding Information: The financial support from the National Research Foundation of Korea funded by the Korean Government (NRF-2014S1A3A2044238) is gratefully acknowledged. Tragically, we lost Professor Manjong Lee in May 2016 after the paper was completed. He and his devotions to economics will be greatly missed. Publisher Copyright: {\textcopyright} 2016, Korean Economic Association. All rights reserved.",

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N1 - Funding Information: The financial support from the National Research Foundation of Korea funded by the Korean Government (NRF-2014S1A3A2044238) is gratefully acknowledged. Tragically, we lost Professor Manjong Lee in May 2016 after the paper was completed. He and his devotions to economics will be greatly missed. Publisher Copyright: © 2016, Korean Economic Association. All rights reserved.

PY - 2016/6/1

Y1 - 2016/6/1

N2 - The effects of choosing between cash and credit as a means of payment on bank’s excess reserves are explored in the proposed model. The model incorporates the widespread recent features of payment patterns and financial services. Results suggest that credit increases excess reserves and generates leeway for banks to invest in interest-bearing assets. Given the growth rate of money, credit transactions increase, but welfare decreases. This phenomenon implies the optimality of the Friedman rule.

AB - The effects of choosing between cash and credit as a means of payment on bank’s excess reserves are explored in the proposed model. The model incorporates the widespread recent features of payment patterns and financial services. Results suggest that credit increases excess reserves and generates leeway for banks to invest in interest-bearing assets. Given the growth rate of money, credit transactions increase, but welfare decreases. This phenomenon implies the optimality of the Friedman rule.

KW - Bank

KW - Credit

KW - Monetary policy

KW - Money

KW - Reserve

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ER -

Multiple means of payment, excess reserves, and monetary policy

Abstract

Keywords

ASJC Scopus subject areas

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