Economics at your fingertips  

Indeterminacy with constant money growth rules and income-based liquidity constraints

Stefano Bosi () and Frédéric Dufourt ()
Additional contact information
Stefano Bosi: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne

Post-Print from HAL

Abstract: We study the implications of constant money growth rules on the stability properties of the equilibrium, in economies where the agents are subject to a partial cash-in-advance constraint applying simultaneously to consumption and investment purchases. By reference to similar models in which the liquidity constraint applies only to consumption, we show that the inclusion of investment has dramatic, but contrasting, effects on the range of values giving rise to indeterminacy. First, it increases strongly a lower bound on the share of purchases requiring cash, below which the steady state is always indeterminate. Second, it creates a higher bound on this share, above which the steady state is always determinate. In this context, the steady-state value of the velocity of money becomes a crucial parameter for gauging whether constant money growth rules may be stabilizing or destabilizing for the economy.

Keywords: Cash-in-advance; Indeterminacy; Business cycles (search for similar items in EconPapers)
Date: 2008-06
Note: View the original document on HAL open archive server:
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Published in Research in Economics, Elsevier, 2008, 62 (2), pp.57-63. ⟨10.1016/j.rie.2008.04.002⟩

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Indeterminacy with constant money growth rules and income-based liquidity constraints (2008) Downloads
Working Paper: Indeterminacy with Constant Money Growth Rules and Income-Based Liquidity Constraints (2005) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.rie.2008.04.002

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

Page updated 2022-05-12
Handle: RePEc:hal:journl:hal-00796231