Money and Specialization in a Neoclassical Growth Model

Edgar Ghossoub (edgar.ghossoub@utsa.edu) and Robert Reed (rreed@cba.ua.edu)

Journal of Money, Credit and Banking, 2005, vol. 37, issue 5, 969-75

Abstract: This paper studies the links between money, specialization, and capital accumulation in a neoclassical growth framework. For tractability, the transactions role of money is introduced through a cash-in-advance constraint. In contrast to the standard cash-in-advance model, an individual's reliance on money balances for transactions is endogenous through the choice of specialization. Although the cash-in-advance constraint only applies to consumption, the model exhibits a reverse-Tobin effect. We conclude by discussing the implications of the model for the welfare costs of inflation.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:37:y:2005:i:5:p:969-75

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