This paper provides an explanation for both the rapid growth in the use of a debit card over time and the cross-sectional difference in the use of a debit card using a search-theoretic model. The trade-off between cash and a debit card as means of payment is incorporated such that a buyer incurs...

Illiquid nominal government bonds are shown to have two opposing effects on welfare. First, the relatively poor choose to top-up money balances for future consumption by purchasing nominal bonds at a discount. The wealth distribution becomes more centered with a smaller consumption deviation...

The coexistence puzzle is explained via an interaction between intermediary cost and uncertainty with regards to consumption trade. If a trade opportunity as a buyer is more likely to arise, ex-ante net return on bond at the margin would be negative up to a certain amount of transactions and,...

A simple monetary model is constructed to study the implications of an indexed unit of account (Indexed-UoA). In an economy with an Indexed-UoA, credit trade friction attributed to inflation is resolved and there is no redistributional effect from unexpected inflation between debtors and...

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...

The welfare cost of inflation is explored via a search-theoretic model in which along with non-interest-bearing cash, interest-bearing liquid and illiquid assets are available. With inflation, agents are willing to replace higher-return illiquid assets with lower return liquid assets for...