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Money and growth revisited : Measuring the costs of inflation in an endogenous growth model

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  • Gomme, Paul

Abstract

Results in Lucas (1987) suggest that if public policy can affect the growth rate of the economy, the welfare implications of alternative policies will be large. In this paper, a stochastic, dynamic general equilibrium model with endogenous growth and money is examined. In this setting, inflation lowers growth through its effect on the return to work. However, the welfare costs of higher inflation are modest.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 32 (1993)
Issue (Month): 1 (August)
Pages: 51-77

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Handle: RePEc:eee:moneco:v:32:y:1993:i:1:p:51-77

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Web page: http://www.elsevier.com/locate/inca/505566

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References

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  1. 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.
  2. Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model," American Economic Review, American Economic Association, vol. 79(4), pages 733-48, September.
  3. Gomme, Paul & Greenwood, Jeremy, 1995. "On the cyclical allocation of risk," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 91-124.
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  5. Howitt, P., 1990. "Money And Growth Revisited," UWO Department of Economics Working Papers 9014, University of Western Ontario, Department of Economics.
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  7. James Davies & John Whalley, 1989. "Taxes and Capital Formation: How Important is Human Capital?," NBER Working Papers 2899, National Bureau of Economic Research, Inc.
  8. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
  9. Jeremy Greenwood & Gregory W. Huffman, 1991. "Tax analysis in a real business cycle model: on measuring Harberger triangles and Okun gaps," Staff Report 138, Federal Reserve Bank of Minneapolis.
  10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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  12. Benoit Carmichael, 1989. "Anticipated Monetary Policy in a Cash-in-Advance Economy," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 93-108, February.
  13. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  14. Wilbur John Coleman II, 1989. "An algorithm to solve dynamic models," International Finance Discussion Papers 351, Board of Governors of the Federal Reserve System (U.S.).
  15. Cardia, Emanuela, 1991. "The dynamics of a small open economy in response to monetary, fiscal, and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 411-434, December.
  16. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  17. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  18. Thomas F. Cooley & Gary D. Hansen, 1989. "Some welfare costs of monetary and fiscal policy," Proceedings, Federal Reserve Bank of San Francisco.
  19. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  20. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
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