Monetary, Fiscal, and Bank Regulatory Policy in a Simple Monetary Growth Model
AbstractWe 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 we 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; we show how reserve requirements that never bind along actual equilibrium paths can play an important role in avoiding undesirable equilibria. Finally, we demonstrate that changes in (apparently) nonbinding reserve requirements can have significant real effects.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 5136.
Date of creation: 01 May 1997
Date of revision:
Publication status: Published in International Economic Review, May 1997, vol. 3 no. 2, pp. 321-350
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Other versions of this item:
- Joydeep Bhattacharya & Mark G. Guzman & Elisabeth Huybens & Bruce D. Smith, 1995. "Monetary, Fiscal, and Bank Regulatory Policy in a Simple Monetary Growth Model," Working Papers 9501, Centro de Investigacion Economica, ITAM.
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- 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.
- Caroline Betts & Elisabeth Huybens, 1999. "Financial Market Imperfections, Real Exchange Rates, and Capital Flows," Working Papers 9902, Centro de Investigacion Economica, ITAM.
- Andrés Felipe Arias, 2000. "The Colombian Banking Crisis: Macroeconomic Consequences And What To Expect," BORRADORES DE ECONOMIA 003573, BANCO DE LA REPÚBLICA.
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