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Monetary policy in a small open economy with durable goods and differing cash-in-advance constraints

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  • Mansoorian, Arman
  • Michelis, Leo
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    Abstract

    We consider the effects of inflation in a small open economy when expenditures on non-durables are more heavily financed with money than expenditures on durables. The distinctions between non-durables and durables, and asymmetric cash-in-advance constraints give rise to important dynamics.

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    File URL: http://www.sciencedirect.com/science/article/B6V84-4Y95RFT-6/2/1108e58284bf7ab591ad1e6cb8908b59
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 107 (2010)
    Issue (Month): 2 (May)
    Pages: 246-248

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    Handle: RePEc:eee:ecolet:v:107:y:2010:i:2:p:246-248

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    Web page: http://www.elsevier.com/locate/ecolet

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    Keywords: Inflation Cash Credit Durables Capital;

    References

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    1. Borzekowski, Ron & Kiser, Elizabeth K., 2008. "The choice at the checkout: Quantifying demand across payment instruments," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 889-902, July.
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    3. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-31, November.
    4. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1142-61, December.
    5. Mansoorian, Arman & Mohsin, Mohammed, 2006. "On the employment, investment and current account effects of inflation," Journal of International Economics, Elsevier, vol. 70(1), pages 296-313, September.
    6. Sen, Partha & Turnovsky, Stephen J., 1989. "Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect," Journal of International Economics, Elsevier, vol. 26(3-4), pages 227-250, May.
    7. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Maurice Obstfeld, 1980. "Capital Mobility and Devaluation in an Optimizing Model with Rational Expectations," NBER Working Papers 0557, National Bureau of Economic Research, Inc.
    9. Robert E. Lucas Jr. & Nancy L. Stokey, 1984. "Money and Interest in Cash-In-Advance Economy," Discussion Papers 628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Eichenbaum, Martin & Hansen, Lars Peter, 1990. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 53-69, January.
    11. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    12. Miguel Sidrauski, 1967. "Inflation and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 75, pages 796.
    13. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, December.
    14. Shi, Shouyong & Epstein, Larry G, 1993. "Habits and Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February.
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    Cited by:
    1. Yanagihara, Mitsuyoshi & Lu, Chen, 2013. "Cash-in-advance constraint, optimal monetary policy, and human capital accumulation," Research in Economics, Elsevier, vol. 67(3), pages 278-288.

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