Inflation and Balanced-Path Growth with Alternative Payment Mechanisms

Max Gillman () and Michal Kejak ()

No 402, IEHAS Discussion Papers from Institute of Economics, Hungarian Academy of Sciences

Abstract: The paper shows that contrary to conventional wisdom an endogenous growth economy with human capital and alternative payment mechanisms can robustly explain major facets of the long run inflation experience. A negative inflation-growth relation is explained, including a striking nonlinearity found re-peatedly in empirical studies. A set of Tobin (1965) effects are also explained and, further, linked in magnitude to the growth effects through the interest elasticity of money demand. Undis-closed previously, this link helps fill out the intuition of how the inflation experience can be plausibly explained in a robust fashion with a model extended to include credit as a payment mechanism.

Keywords: Human capital; cash-in-advance; interest-elasticity; credit production (search for similar items in EconPapers)
JEL-codes: O42 E31 E22 (search for similar items in EconPapers)
Date: 2004-02
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Related works:
Working Paper: Inflation and Balanced-Path Growth with Alternative Payment Mechanisms (2005)
Journal Article: Inflation and Balanced-Path Growth with Alternative Payment Mechanisms (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:has:discpr:0402

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