 Money and Economic Growth Increasing Returns- to ScaleDiscussion Paper Series from Institute of Economic Research, Hitotsubashi University Abstract: This paper investigates the effects of inflation on the equilibrium growth in the cash-in-advance model when a social technology can display increasing returns-to-scale in capital and labor. In the analysis, we first consider the economy where there exists a constant steady state equilibrium. To the extent that a social technology displays decreasing returns-to-scale in capital, inflation has a negative effect on the steady-state capital stock, labor input, and output. However, when a social technology displays increasing returns-to scale in capital, inflation increases the steady-state capital stock and output, although it decreases the steady-state labor input. In the second part of this paper, we examine the economy where per capita output grows endogenously. When a social technology displays decreasing returns-to-scale in labor, inflation has a negative effect on a unique balanced growth. However, when a social technology displays some significant increasing returns-to-scale in labor, the ecoonmy can have two balanced growth paths with a high and low growth rates. In particular, if the economy is on the balanced growth paths with a low growth rate, inflation increases the growth rate of capital stock and the level of labor input. Date: 1996-03 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:a320 Access Statistics for this paper More papers in Discussion Paper Series from Institute of Economic Research, Hitotsubashi University Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.