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Monetary, Fiscal, and Reserve Requirement Policy in a Simple Monetary Growth Model

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  • Bhattacharya, Joydeep, et al

Abstract

The authors consider an otherwise conventional monetary growth model in which spatial separation and limited communication create a transactions role for currency, and stochastic relocation gives rise to financial intermediaries. In this framework they consider how changes in fiscal and monetary policy, and in reserve requirements, affect inflation, capital formation, and nominal interest rates. There is also considerable scope for multiple equilibria; the authors show how reserve requirements that never bind along actual equilibrium paths can play an important role in avoiding undesirable equilibria. Finally, they demonstrate that changes in (apparently) nonbinding reserve requirements can have significant, real effects. Coauthors are Mark G. Guzman, Elisabeth Huybens, and Bruce D. Smith. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 38 (1997)
Issue (Month): 2 (May)
Pages: 321-50

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Handle: RePEc:ier:iecrev:v:38:y:1997:i:2:p:321-50

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Cited by:
  1. Jianhuai Shi, 2002. "The Economic Effects of Inflation Tax Instruments in an Overlapping-Generations Economy with Production," Annals of Economics and Finance, Society for AEF, vol. 3(2), pages 433-451, November.
  2. Joydeep Bhattacharya & Joseph H. Haslag & Antoine Martin, 2005. "Heterogeneity, Redistribution, And The Friedman Rule," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 437-454, 05.
  3. Bhattacharya, Joydeep & Haslag, Joseph & Russell, Steven, 2005. "The role of money in two alternative models: When is the Friedman rule optimal, and why?," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1401-1433, November.
  4. Caroline Betts & Elisabeth Huybens, 1999. "Financial Market Imperfections, Real Exchange Rates, and Capital Flows," Working Papers 9902, Centro de Investigacion Economica, ITAM.
  5. Joseph H. Haslag & Eric R. Young, 1998. "Money Creation, Reserve Requirements, and Seigniorage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 677-698, July.
  6. Hung, Fu-Sheng, 2003. "Inflation, financial development, and economic growth," International Review of Economics & Finance, Elsevier, vol. 12(1), pages 45-67.
  7. Beatrix Paal & Bruce D. Smith, 2001. "The sub-optimality of the Friedman rule and the optimum quantity of money," IEHAS Discussion Papers 0113, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  8. Hernando Vargas, 1996. "Apertura, Encajes E Intermediación Financiera," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  9. Marco Espinosa-Vega & Steven Russell, 1998. "The long-run real effects of monetary policy: Keynesian predictions from a neoclassical model," Working Paper 98-6, Federal Reserve Bank of Atlanta.
  10. Niloy Bose & Jill A. Holman & Kyriakos C. Neanidis, 2007. "The Optimal Public Expenditure Financing Policy: Does The Level Of Economic Development Matter?," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 433-452, 07.
  11. Tarishi Matsuoka, 2011. "Temporary Bubbles and Discount Window Policy," KIER Working Papers 802, Kyoto University, Institute of Economic Research.

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