Cash-in-advance constraint with status in a neoclassical growth model

Ken-ichi Kaminoyama and Taketo Kawagishi

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we assume that a cash-in-advance (CIA) constraint itself depends on relative income, which implies status. This constraint means that agents with higher income are more creditworthy and can make purchases with fewer money holdings. Under this assumption, we construct a one-sector neoclassical growth model and show that there exists a unique steady state that has saddle-path stability without specifying each function. Furthermore, we examine the effects of money growth on capital accumulation. If the status elasticity of CIA constraint is large, the Tobin effect can arise. In contrast, if it is small, the anti-Tobin effect can arise.

Keywords: Cash-in-advance constraint; Status; Money growth; Neoclassical growth model; Tobin/anti-Tobin effect (search for similar items in EconPapers)
JEL-codes: E41 E52 O42 (search for similar items in EconPapers)
Date: 2012-04-26
New Economics Papers: this item is included in nep-dge and nep-fdg
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