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Keywords:

  • E21;
  • E31;
  • E41;
  • E52
  • inventory-theoretic money demand;
  • credit goods;
  • durables;
  • luxuries

We construct a two-goods inventory-theoretic money demand model and find that the model implies, in a monetary contraction, the decline in the prices of low cash-intensity goods, durables, or luxuries outpaces that of high cash-intensity goods, nondurables, or necessities. Using U.S. data, we show that our model’s predictions are consistent with the data.