'Soft' growth and the role of monetary policy in selecting the long-run equilibrium path
AbstractCombining employment and growth theory with a cash-in-advance constraint, the model determines the balanced growth path (BGP). Under low intertemporal elasticity of substitution in consumption, the Friedman rule is consistent with the existence of an unique BGP: monetary rules leading to a steady-state rate of money expansion higher than that dictated by the Friedman rule lower balanced growth. Under high elasticity, the Friedman rule is consistent with multiple BGP: the authority can "select" the BGP exhibiting the highest growth rate by expanding money at the appropriate fixed rate, since balanced growth rises with the fixed rate of money expansion.
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Bibliographic InfoPaper provided by University of Bergamo, Department of Economics in its series Working Papers with number 0306.
Length: 50 pages
Date of creation: 2003
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On-the-job training; skilled labor; strategic complementarity; indeterminacy; inflation targeting;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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