Money and Endogenous Growth in a Cash-in-Advance Model with Social Status
Hung-Ju Chen and
Jang-Ting Guo ()
No 200906, Working Papers from University of California at Riverside, Department of Economics
Motivated by the substantial increase of nominal money supply in the U.S. economy since late 2008, this paper examines the equilibrium growth effect of money/inflation within a standard one-sector AK model of endogenous growth with wealth-enhanced preferences for social status and the most generalized cash-in-advance constraint. We show that the sign for the correlation between money and output growth depends crucially on (i) the liquidity-constrained ratio of consumption to investment, and (ii) how the shadow price of physical capital responds to a change in the monetary growth rate. This money-growth correlation, as well as the growth effect of social status, turns out to be closely related to the local stability properties of the economy's balanced growth path(s).
Keywords: Money; Endogenous Growth; Cash-in-Advance Constraint; Social Status; In- determinacy (search for similar items in EconPapers)
JEL-codes: E52 O42 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2009-06, Revised 2009-06
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:200906
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