On Money As a Latent Medium of Exchange

Shengxing Zhang and Ricardo Lagos

No 14051, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We formulate a generalization of the traditional medium-of-exchange function of money in contexts where there is imperfect competition in the intermediation of credit, settlement, or payment services used to conduct transactions. We find that the option to settle transactions directly with money strengthens the stance of sellers of goods and services vis-a-vis intermediaries. We show this mechanism is operative even for sellers who never exercise the option to sell for cash, and that these latent money demand considerations imply monetary policy remains effective through medium-of-exchange channels even if the share of monetary transactions is arbitrarily small.

Keywords: Cashless; Credit; Liquidity; Money; Monetary policy (search for similar items in EconPapers)
JEL-codes: D83 E52 G12 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP14051 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14051

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14051

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().