The constrained availability of farming land and the existence of other far more lucrative urbandirected investment outlets resulted in people's non-interest in agricultural investment.
The threat is that there must be non-interest values in terms of which interests are ranked.
We also calculate the welfare cost of inflation in restricted models that contain only non-interest-bearing money.
In our view, the monetary aggregates should be nested about (at a minimum) all non-interest bearing assets.
These are the average expenditure shares for the simple-sum aggregates, which are computed under the assumption that all components of the aggregates are non-interest-bearing.
In response, agents attempt to substitute away from non-interest-bearing monetary assets, which causes the price level to increase and real monetary asset stocks to decline.
In this sense, our model provides a lower bound on the welfare cost, whereas a model that assumes all deposits are non-interest-bearing provides an upper bound.
We find that the welfare cost of inflation is substantially lower in the model with interest-bearing deposits than in models where all monetary assets are assumed to be non-interest bearing.
