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Title Multiple Means of Payment, Excess Reserves, and Monetary Policy
Author Hyung Sun Choi (Kyung Hee University), Manjong Lee (Korea University)
Volume 32 Number 1
Keywords Money, Credit, Bank, Reserve, Monetary Policy
Abstract The effects of choosing between cash and credit as a means of payment on banks excess
reserves are explored in the proposed model. The model incorporates the widespread recent
features of payment patterns and financial services. Results suggest that credit increases excess
reserves and generates leeway for banks to invest in interest-bearing assets. Given the growth
rate of money, credit transactions increase, but welfare decreases. This phenomenon implies
the optimality of the Friedman rule.
File KER-20160630-31-1-01.pdf
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