by CEPR Discussion Paper 18291 and SNB Working Paper 3/2023, July 2023. HTML, PDF (local copy CEPR, local copy SNB). We analyze the effect of structural change in the payment sector and of monetary policy on prices. Means of payment are obtained through portfolio choices and commodity sales and “liquified” through velocity choices. Interest rates, intermediation margins, and costs of payment instrument use affect portfolios, velocities, liquidity, relative prices, and the aggregate price level. Money is neutral, interest rate policy is not. Scarcer liquidity need not drive up velocity. Payment instruments and velocities generate positive externalities. Commodity price aggregates mis-measure consumer price inflation, distinctly so over the business cycle.
Topics:
Dirk Niepelt considers the following as important: Cash-in-advance constraint, Central Bank, inflation, Liquidity, Measurement, Payment, Payment instrument, Price level, Research, Velocity
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CEPR Discussion Paper 18291 and SNB Working Paper 3/2023, July 2023. HTML, PDF (local copy CEPR, local copy SNB).
We analyze the effect of structural change in the payment sector and of monetary policy on prices. Means of payment are obtained through portfolio choices and commodity sales and “liquified” through velocity choices. Interest rates, intermediation margins, and costs of payment instrument use affect portfolios, velocities, liquidity, relative prices, and the aggregate price level. Money is neutral, interest rate policy is not. Scarcer liquidity need not drive up velocity. Payment instruments and velocities generate positive externalities. Commodity price aggregates mis-measure consumer price inflation, distinctly so over the business cycle.