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Equilibrium Dynamics in an Endogenous Growth Model of Money and Banking

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  • JUIN-JEN CHANG
  • WEN-YA CHANG
  • CHING-CHONG LAI
  • PING WANG

Abstract

We construct an analytically tractable endogenous growth model of money and banking where money provides "liquidity services" to facilitate transactions and banks convert non-reserve deposits into productive capital. We examine both the long- and short-run effects of changes in the money growth rate or the reserve requirement ratio. In response to a change in the required reserve ratio, the inflation rate and the growth rates of capital, real balances, and consumption need not adjust monotonically along the transition path. While the balanced growth equilibrium may be either a saddle or a source locally, the global dynamical system exhibits flip bifurcation. Copyright 2007 The Ohio State University.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 39 (2007)
Issue (Month): 7 (October)
Pages: 1683-1710

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Handle: RePEc:mcb:jmoncb:v:39:y:2007:i:7:p:1683-1710

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Robert Amano & Tom Carter & Kevin Moran, 2012. "Inflation and Growth: A New Keynesian Perspective," Working Papers 12-23, Bank of Canada.
  2. Wei-bin Zhang, 2011. "Elastic Labour Supply and Home Production in a Monetary Growth Model," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 9(2), pages 87-100.
  3. Firouz Gahvari, 2009. "Friedman Rule in a Model with Endogenous Growth and Cash-in-advance Constraint," CESifo Working Paper Series 2708, CESifo Group Munich.
  4. Velasco Morente, Francisco & Nadal Morales, Purificación & González Abril, Luis & Ortega Ramírez, Juan Antonio, 2009. "Bifurcaciones de codimensión 2 en un modelo dinámico del mercado potencial y actual: aplicación al mercado cervecero español = Bifurcations of Codimension 2 in a Dynamical Model of Current and Pot," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 7(1), pages 77-94, June.

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