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On imperfect competition with occasionally binding cash-in-advance constraints

Dixon, Huw and Pourpourides, Panayiotis 2016. On imperfect competition with occasionally binding cash-in-advance constraints. Journal of Macroeconomics 50 , pp. 72-85. 10.1016/j.jmacro.2016.09.002

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We provide a theoretical demonstration of the link between imperfect competition and the cash-in-advance constraint, not previously considered in the literature. In a general equilibrium framework, we show that imperfect competition affects the proportion of times that the cash-in-advance constraint binds. As the market becomes more competitive it is certainly no less likely that the cash-in-advance constraint will bind. Therefore, economic welfare changes not only because of the direct effect of the change in the distribution of aggregate consumption but also because of the indirect effect of the cash-in-advance constraint. Other implications are also demonstrated

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
Publisher: Elsevier
ISSN: 0164-0704
Date of First Compliant Deposit: 20 September 2016
Date of Acceptance: 7 September 2016
Last Modified: 20 Dec 2017 05:57

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