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Non-separable utility, wealth effects, and economic growth in a monetary economy

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Author Info
Kei Hosoya () (Graduate School of Economics, Hitotsubashi University)
Abstract

This paper investigates the effects of wealth-enhanced social status using an optimizing monetary growth model with non-separable utility function between consumption and wealth. Within this framework, we first arrive a conclusion that, in the case of no wealth effects, an increase in the rate of money growth does not stimulate the steady-state growth rate. Moreover, in the case of existing wealth effects, we show that an increase in the rate of money growth has a negative effect on the long-run growth rate of the economy. This result is in sharp contrast with the typical conclusion of the relevant field.

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Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 15 (2002)
Issue (Month): 10 ()
Pages: 1-7
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Handle: RePEc:ebl:ecbull:v:15:y:2002:i:10:p:1-7

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Related research
Keywords: AK model; Cash-in-advance constraint; Non-separable utility; Wealth effects;

Find related papers by JEL classification:
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
E0 - Macroeconomics and Monetary Economics - - General

References listed on IDEAS
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  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. Marquis, M.H. & Reffett, K.L., 1991. "Real Interest and Endogenous Growth in a Monetary Economy," Working Papers 1991_06_02, Department of Economics, Florida State University.
  3. Corneo, Giacomo & Jeanne, Olivier, 2001. " Status, the Distribution of Wealth, and Growth," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(2), pages 283-93, June. [Downloadable!] (restricted)
  4. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June. [Downloadable!] (restricted)
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  5. Zou, Heng-fu, 1994. "'The spirit of capitalism' and long-run growth," European Journal of Political Economy, Elsevier, vol. 10(2), pages 279-293, July. [Downloadable!] (restricted)
    Other versions:
  6. Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July. [Downloadable!] (restricted)
  7. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January. [Downloadable!] (restricted)
  8. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  9. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January. [Downloadable!] (restricted)
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  10. Chang, Wen-ya & Hsieh, Yi-ni & Lai, Ching-chong, 2000. "Social status, inflation, and endogenous growth in a cash-in-advance economy," European Journal of Political Economy, Elsevier, vol. 16(3), pages 535-545, September. [Downloadable!] (restricted)
  11. Franz Wirl, 1994. "The ramsey model revisited: The optimality of cyclical consumption and growth," Journal of Economics, Springer, vol. 60(1), pages 81-98, February. [Downloadable!] (restricted)
  12. Marquis, Milton H. & Reffett, Kevin L., 1991. "Real interest rates and endogenous growth in a monetary economy," Economics Letters, Elsevier, vol. 37(2), pages 105-109, October. [Downloadable!] (restricted)
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