Inflation and Growth: Pecuniary Transactions Costs and Qualitative Equivalence
AbstractThis paper develops a pecuniary transactions costs (TC) approach to reexamine the principal relationships and results concerning inflation and growth. In a model with a general TC function and an endogenous labor-leisure choice, we consider four special cases by distinguishing among money as (1) a consumption good, (2) a production good, (3) an investment good, and (4) a consumption good as well as an investment good. Under some weaker conditions as in related studies, a reversed Tobin effect obtains for all cases: a high monetary growth rate leads to lower steady-state capital, labor. consumption, and real money balances. These findings suggest that a pecuniary TC model is qualitatively equivalent to alternative models in the literature.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 32 (2000)
Issue (Month): 1 (February)
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