Cash-in-advance constraint with status and endogenous growth

Taketo Kawagishi and Ken-ichi Kaminoyama

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores a one-sector AK model with a cash-in-advance (CIA) constraint that itself depends on relative income, which implies status (we call this constraint the “CIA-status constraint”). The CIA-status constraint means that agents with higher income are more creditworthy and can make purchases with fewer money holdings. Under the Clower-Lucas-type CIA-status constraint, we show that the endogenous growth rate and money growth are positively correlated. On the other hand, under the Stockman-type CIA-status constraint, we confirm that the relationship between the endogenous growth rate and money growth changes from negative to positive when the elasticity of the CIA constraint with respect to status exceeds one.

Keywords: Cash-in-advance constraint; Status; Endogenous growth; Money growth (search for similar items in EconPapers)
JEL-codes: E41 E52 O42 (search for similar items in EconPapers)
Date: 2014-05-14
New Economics Papers: this item is included in nep-gro and nep-mac
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