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On the growth and velocity effects of money

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Author Info
Shu-Hua Chen () (Shih Chien University)
Jang-Ting Guo () (University of California, Riverside)
Abstract

We show that a one-sector AK model of endogenous growth with the most generalized cash-in-advance constraint is able to account for (i) the observed long-run negative relationship between the nominal growth rate of money and the income velocity of money, (ii) the empirically ambiguous effect of changing inflation on the economy's output growth, and (iii) the divergent growth experience of countries that start with similar macroeconomic conditions.

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File URL: http://economicsbulletin.vanderbilt.edu/2008/volume5/EB-08E50014A.pdf
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Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 5 (2008)
Issue (Month): 13 ()
Pages: 1-7
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Handle: RePEc:ebl:ecbull:v:5:y:2008:i:13:p:1-7

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Related research
Keywords: Cash-in-Advance Constraint Endogenous Growth.

Find related papers by JEL classification:
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

References listed on IDEAS
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  1. Eichenbaum, Martin S & Hansen, Lars Peter & Singleton, Kenneth J, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 51-78, February. [Downloadable!] (restricted)
    Other versions:
  2. Bullard, James & Keating, John W., 1995. "The long-run relationship between inflation and output in postwar economies," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 477-496, December. [Downloadable!] (restricted)
  3. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor, 2001. "Does inflation matter for growth?," Japan and the World Economy, Elsevier, vol. 13(4), pages 405-428, December. [Downloadable!] (restricted)
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  5. repec:fth:simfra:93-03 is not listed on IDEAS
  6. Gomme, P., 1993. "Money and Growth Revisited : Measuring the Costs of Inflation in an Endogenous Growth Model," Discussion Papers dp93-03, Department of Economics, Simon Fraser University.
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  7. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July. [Downloadable!] (restricted)
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  8. Suen, Ming-Hon & Yip, Chong K., 2005. "Superneutrality, indeterminacy and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 579-595, December. [Downloadable!] (restricted)
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  9. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June. [Downloadable!] (restricted)
  10. Wang, Ping & Yip, Chong K, 1992. "Alternative Approaches to Money and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(4), pages 553-62, November. [Downloadable!] (restricted)
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  11. Thomas W. Bates & Kathleen M. Kahle & Rene M. Stulz, 2006. "Why Do U.S. Firms Hold So Much More Cash Than They Used To?," NBER Working Papers 12534, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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