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Economic Stability and Interest-Rate Controls in an Open-Economy Model with Productive Money

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  • Seiya Fujisaki

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    (Department of Education, Shinshu University)

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    Abstract

    We analyze the relation between interest-rate controls and equilibrium determinacy in a two-country model in which money is employed as a factor of production. Given this specification, holding cash generates an opportunity cost. Therefore, equilibrium can be indeterminate even if both countries demonstrate additive-separable utilities between consumption and non-productive money.

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P292.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 32 (2012)
    Issue (Month): 4 ()
    Pages: 3053-3060

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    Handle: RePEc:ebl:ecbull:eb-12-00446

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    Related research

    Keywords: Taylor rule; productive money; equilibrium determinacy; open economy.;

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    1. Allen Sinai & Houston H. Stokes, 1989. "Money Balances in the Production Function: A Retrospective Look," Eastern Economic Journal, Eastern Economic Association, vol. 15(4), pages 349-363, Oct-Dec.
    2. Fujisaki, Seiya, 2012. "Interest Rate Control Rules and Macroeconomic Stability in a Heterogeneous Two-Country Model," MPRA Paper 37017, University Library of Munich, Germany.
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