Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189238 
Authors: 
Year of Publication: 
1995
Series/Report no.: 
Queen's Economics Department Working Paper No. 917
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
This paper examines the competition between money and credit in a search model with divisible commodities. It is shown that flat money can be valuable even though it yields a lower rate of return than the coexisting credit. The competition between money and credit increases efficiency. The monetary equilibrium with credit Pareto dominates the monetary equilibrium without credit whenever the two coexist. When a credit is repaid with money, the competition also bounds the purchasing power of money from below by that of credit. In so doing it eliminates the weak monetary equilibrium found in previous search models. With numerical examples, we rank three different monetary equilibria and examine the properties of the interest rate.
Subjects: 
search
money
credit
return dominance
JEL: 
E40
C78
Document Type: 
Working Paper

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