Monetary policy, endogenous transactions, and financial market segmentation

Hyung Sun Choi

Journal of Macroeconomics, 2015, vol. 44, issue C, 234-251

Abstract: An endogenous financial market segmentation model is constructed to explore the role of costly credit as a medium of exchange in the monetary policy elasticity of financial market activity. Against inflation risk, credit is an alternative insurance device to a cash transfer from the financial market. In equilibrium, credit reduces the financial market activity rate. Monetary policy has redistributive effects across economic individuals. Inflation may not tax financial market non-participants. However, it may tax financial market participants by increasing the financial market activity rate. Welfare may increase and the optimal money growth rate can be positive.

Keywords: Money; Credit; Endogenous financial market activity; Monetary policy (search for similar items in EconPapers)
JEL-codes: E4 E5 G1 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:44:y:2015:i:c:p:234-251

DOI: 10.1016/j.jmacro.2015.03.005

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