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Monetary policy in a cash-in-advance economy: employment, capital accumulation, and the term structure of interest rates

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Author Info
Arman Mansoorian
Mohammed Mohsin

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Abstract

In this paper we study the effects of monetary policies on employment, capital accumulation, consumption, and the term structure of interest rates in a cash-in-advance economy, where money is required for consumption expenditures. Monetary policy involves targeting the inflation rate. The detailed dynamics of the model are fully worked out. As no numerical analysis is involved, we are able to identify very clearly the different channels through which monetary policy will impinge on the important macroeconomic variables. The model is also used to discuss the `Great Canadian Slump.'

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 37 (2004)
Issue (Month): 2 (May)
Pages: 336-352
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Handle: RePEc:cje:issued:v:37:y:2004:i:2:p:336-352

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393. [Downloadable!] (restricted)
  2. McCafferty, Stephen, 1986. "Aggregate Demand and Interest Rates: A Macroeconomic Approach to the Term Structure," Economic Inquiry, Oxford University Press, vol. 24(4), pages 521-33, October.
  3. Rebelo, Sergio & Xie, Danyang, 1999. "On the optimality of interest rate smoothing," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 263-282, April. [Downloadable!] (restricted)
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  4. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May. [Downloadable!] (restricted)
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  5. Stephen J. Turnovsky, 1989. "The Term Structure of Interest Rates and the Effects of Macroeconomic Policy," NBER Working Papers 2902, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December. [Downloadable!] (restricted)
  7. Charles T. Carlstrom & Timothy S. Fuerst, 1995. "Interest rate rules vs. money growth rules: a welfare comparison in a cash-in-advance economy," Working Paper 9504, Federal Reserve Bank of Cleveland. [Downloadable!]
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  8. Turnovsky, Stephen J & Sen, Partha, 1991. "Fiscal Policy, Capital Accumulation, and Debt in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 43(1), pages 1-24, January. [Downloadable!] (restricted)
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  9. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-39, November. [Downloadable!] (restricted)
  10. Turnovsky, Stephen J., 1986. "Short-term and long-term interest rates in a monetary model of a small open economy," Journal of International Economics, Elsevier, vol. 20(3-4), pages 291-311, May. [Downloadable!] (restricted)
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  11. Abel, Andrew B., 1985. "Dynamic behavior of capital accumulation in a cash-in-advance model," Journal of Monetary Economics, Elsevier, vol. 16(1), pages 55-71, July. [Downloadable!] (restricted)
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  12. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  13. Turnovsky, Stephen J & Miller, Marcus H, 1984. "The Effects of Government Expenditure on the Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 16-33, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Arman Mansoorian & Mohammed Mohsin, 2002. "On the Implications of Different Cash-in-Advance Constraints With Endogenous Labour," Working Papers 2002_03, York University, Department of Economics. [Downloadable!]
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