Inflation Risk, Settlement Cycles, and Monetary Policy

Hyung Sun Choi

Korean Economic Review, 2018, vol. 34, 267-282

Abstract: A monetary model is constructed to explore the risk-sharing role of multiple installment payments for credit settlement against inflation risk when the choice of cash and credit is endogenous. Economic individuals acquire liquidity for cash consumption and credit settlement. In equilibrium, the choice of a debt rollover may adjust the demand for liquidity in credit settlement to dampen consumption loss. Welfare benefits result from inflation. The optimal money growth is positive with a zero nominal interest rate and a one-period settlement cycle.

Keywords: Money; Credit; Settlement; Inflation; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E42 E44 E50 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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