This paper is motivated by empirical observations on the comovements of currency velocity, inflation, and the relative size of the credit services sector. We document these comovements and incorporate into a monetary growth model a credit services sector that provides services that help people...

There are several models of outside money in which some inflation accomplished through lump-sum transfers is optimal. It is shown here that inflation can be optimal in a model of inside money, essentially the model in Cavalcanti-Wallace (1999). The possibility of inflation comes about via the...