The paper presents the welfare cost of inflation in a banking time economy that models exchange credit through a bank production approach. The estimate of welfare cost uses fundamental parameters of utility and production technologies. It is compared to a cash-only economy, and a Lucas (2000)...

We develop a New Keynesian model where all payments between agents require bank deposits through deposits-in-advance constraints, bank deposits are created through disbursement of bank loans, and banks face a convex lending cost. At the zero lower bound on deposit rates (ZLBD), changes in policy...

An upward trend in the share of cash in GDP has been observed since the beginning of the 21st century and has not yet been fully explained in the literature. In fact, the interest rate is the only variable that has been well researched and well confirmed as a determinant of the cash/GDP ratio....