Social status and long-run effects of monetary policy in a two-sector monetary economy of endogenous growth

Hung-Ju Chen

Mathematical Social Sciences, 2011, vol. 61, issue 1, 71-79

Abstract: We develop a two-sector monetary economy with human capital accumulation and a cash constraint applied to both consumption and investment to examine the ways in which social status affects the impact of monetary policy on the long-run economic growth rate. Our findings suggest that the formation of human capital is an important determinant to the super-neutrality of money in the growth-rate sense. Within an economy with Lucas-type human capital formation, money is super-neutral; however, within an economy where human capital accumulation formation is more generalized, and in which both physical and human capital are used as inputs, the growth rate in money will have a negative effect on the long-run growth rate of the economy. The existence, uniqueness and saddle-path stability of balanced-growth equilibrium are also examined.

Keywords: Cash-in-advance; economy; Endogenous; growth; Social; status (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:61:y:2011:i:1:p:71-79

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