Liquidity, innovation and growth

Aleksander Berentsen, Mariana Rojas Breu () and Shouyong Shi
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Mariana Rojas Breu: LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres
Authors registered in the RePEc Author Service: Mariana Rojas-Breu

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Abstract: Many countries simultaneously suffer from high inflation, low growth and poorly developed financial sectors. In this paper, we integrate a microfounded model of money and finance into a model of endogenous growth to examine the effects of inflation on welfare, growth and the size of the financial sector. A novel feature is that the innovation sector is decentralized. Financial intermediaries arise endogenously to provide liquidity to this sector. Consistent with the data but in contrast to previous work, reducing inflation generates large growth gains. These large gains cannot be easily reproduced by imposing a cash-in-advance constraint in the innovation sector.

Keywords: Inflation; Growth; Search; Innovation; Credit (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.science/hal-01438414v1
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Citations: View citations in EconPapers (12)

Published in Journal of Monetary Economics, 2012, 59 (8), pp.721-737. ⟨10.1016/j.jmoneco.2012.10.005⟩

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Related works:
Journal Article: Liquidity, innovation and growth (2012)
Working Paper: Liquidity, Innovation and Growth (2012)
Working Paper: Liquidity, innovation and growth (2012)
Working Paper: Liquidity, Innovation and Growth (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01438414

DOI: 10.1016/j.jmoneco.2012.10.005

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