MIU with Costly Cash Holdings. In addition to the ' 'opportunity cost" of holding cash (which is characterized by the net nominal interest rate another type of cost that can be considered is the "risk" of holding cash. I To capture this idea: suppose that there is a strictly positive exogenous "cash holdings cost" that is denominated by K, > O (the Greek lowercase letter 'kappa") and that this cost could potentially change over time. With the strictly positive cost K, the representative consumer' s period-t budget constraint is in which the novel term compared to the budget constraint in Chapter 15 is the proportional cash holdings cost K, on the expenditure side. The rest of the notation is exactly as in Chapter 15: nominal income (over which the consumer has no control) is denoted as Y, , and the bond: money: and stock holdings at the beginning of period t are: respectively Bt-l: M? 1 : and at-I _ The individual's budget constraints for period t+l, t-+2, t+3, are identical but uith time subscripts appropriately upd ated The period-t utility ftnction is identical to that in Chapter 15, u q, with strictly increasing utility in each of the two arguments and diminishing marginal utility in each of the two arguments. As always in an infinite-horizon consumer frameuork: the representative individual's subjective discount factor between any pair of consecutive time periods is p e (O. l)