The welfare cost of inflation is studied with a model in which non-interest-bearing money coexists with an interest-bearing liquid asset. Compared to a money-only model, the presence of an interest-bearing liquid asset reduces the consumption distortion of inflation. However, it also induces the...

Retailers in the Netherlands and the U.K. can charge different prices for a commodity depending on whether cash or a debit card is used as payment, whereas retailers in the U.S. generally cannot. These two types of economies with and without a uniform pricing constraint for cash and debit card...

Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are endogenous. In the model, trades in pairwise meetings alternate in time with the opportunity to freely...

This paper provides an explanation for the nature of the real effects of denomination structure using parameterized versions of a search-based model. We show that the carrying cost of money incurs the distortionary effect on output and the adverse distributional effect on welfare. With monetary...