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Intermediary Cost and Coexistence Puzzle

Young Sik Kim () and Manjong Lee
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Young Sik Kim: Department of Economics Seoul National University, Seoul, South Korea

No 1103, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: The coexistence puzzle is explained via an interaction between intermediary cost and uncertainty on consumption trade. If the 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 transaction and, therefore, agents are willing to hold money in the presence of interest-bearing bond.

Keywords: intermediary cost; interest-bearing asset; coexistence puzzle (search for similar items in EconPapers)
JEL-codes: E40 E42 (search for similar items in EconPapers)
Date: 2011
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