Social status, inflation uncertainty and growth in a cash-in-advance economy

Liutang Gong

International Economic Journal, 2008, vol. 22, issue 3, 299-314

Abstract: In a stochastic monetary model with the cash-in-advance constraint and the social-status concern, this paper studies the effects of inflation and inflation variability on growth. It is shown that the Tobin effect still holds under deterministic monetary growth. The effect of inflation on growth, however, is ambiguous under stochastic monetary growth: the effect is positive when an agent's desire for social status is relatively strong and negative when this desire is relatively weak. It is also found that inflation variability always stimulates growth.

Keywords: inflation uncertainty; social status; economic growth; cash-in-advance constraint (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1080/10168730802294545

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