Money and Credit Revisited

26 Pages Posted: 19 Dec 2019 Last revised: 11 Feb 2021

See all articles by Han Han

Han Han

Peking University

Chao He

East China Normal University (ECNU)

Date Written: September 15, 2019


Gu, Mattesini, and Wright (2016) show that if money is essential, then nomonetary credit (i.e., deferred payment to sellers) is irrelevant. We find that in an otherwise same model that also allows monetary credit (i.e., borrowing money from third parties), nonmonetary credit is relevant when money is essential. While nonmonetary credit can still be neutral locally, this result critically depends on the tightness of monetary credit. A tight monetary credit limit and loan market clearing restrict how real balances can respond to changes in nonmonetary credit. Money may serve as an accelerator or stabilizer, depending on the types of credit changes and overall credit condition. Our results suggest a subtle three-way relationship among money and the two types of credit.

Keywords: Money, Credit, Debt, Essentiality, Neutrality

JEL Classification: E42, E51

Suggested Citation

Han, Han and He, Chao, Money and Credit Revisited (September 15, 2019). Available at SSRN: or

Han Han

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871

Chao He (Contact Author)

East China Normal University (ECNU) ( email )

North Zhongshan Road Campus
3663 N. Zhongshan Rd.
Shanghai, 200062

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics