84 Intermediary Cost and Coexistence Puzzle
- Young Sik Kim, Manjong Lee
- no.84 김영식 교수님.pdf
Abstract
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 transaction and, therefore, agents are willing to hold money in
the presence of an interest-bearing bond.
Keywords: intermediary cost, interest-bearing asset, coexistence puzzle
JEL classification: E40, E42