A Multi-Regional Monetary Growth Model with the MIU Approach —Inflation Policy, Capital Accumulation and Economic Geography

Wei-Bin Zhang

Indian Economic Review, 2012, vol. 47, issue 2, 223-245

Abstract: This paper proposes a monetary growth model of a multi-regional economy. The national economy consists of multiple regions and each region has one production sector. The study examines possible effects of inflation policy on the long-term economic growth and economic geography. Households move freely between the regions, equalizing utility level among the regions with the utility level depending on real money, consumption, housing, and saving. We also examine effects of changes in the inflation policy, the preference, amenity parameters, and regional productivities on the long-term economic growth and geography. The paper provides some interesting new insights into interregional economy. For instance, our model predicts what Tobin (1965) predicts that an increase in the level of the inflation rate will increase the capital stock of a national economy. But since our national economy consists of multiple regions, our model predicts not only changes in the national variables but also in regional variables. For instance, a rise in the inflation rate tends to make some labor force of the technologically most advanced region migrate to the other regions.

Keywords: Multi-regional Economy; Growth; Money; Inflation Policy; MIU approach; Capital Accumulation; Amenity. (search for similar items in EconPapers)
JEL-codes: E21 E40 (search for similar items in EconPapers)
Date: 2012
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