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Title Inflation Risk, Settlement Cycles, and Monetary Policy
Author Hyung Sun Choi (Kyung Hee University)
Volume 34 Number 2
Pages 267-282 
Keywords Money, Credit, Settlement, Inflation, Monetary Policy
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.
File KER-20180701-34-2-07.pdf
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