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Inflation, Variability, and the Evolution of Human Capital in a Model with Transactions Costs

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    Abstract

    In a monetary growth model, I show that average inflation inhibits growth while inflation volatility enhances it. The effect of nominal volatility on human capital accumulation depends on the response of money demand and the corresponding extent of transactions costs rather than from a direct, precautionary motive.

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    File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/INF_VOL_GRO.pdf
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    Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2006_16.

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    Date of creation: Jul 2006
    Date of revision: Jul 2006
    Handle: RePEc:lbo:lbowps:2006_16

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    Keywords: money; growth; volatility.;

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    1. Hercowitz, Zvi & Sampson, Michael, 1991. "Output Growth, the Real Wage, and Employment Fluctuations," American Economic Review, American Economic Association, vol. 81(5), pages 1215-37, December.
    2. Blackburn, Keith & Pelloni, Alessandra, 2004. "On the relationship between growth and volatility," Economics Letters, Elsevier, vol. 83(1), pages 123-127, April.
    3. Sailesh K. Jha & Ping Wang & Chong K.Yip, 2000. "Dynamics in a Transactions-Based Monetary Growth Model," Vanderbilt University Department of Economics Working Papers 0005, Vanderbilt University Department of Economics.
    4. Max Gillman & Michal Kejak, 2005. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(500), pages 247-270, 01.
    5. van der Ploeg, Frederick & Alogoskoufis, George S, 1994. "Money and Endogenous Growth," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 26(4), pages 771-91, November.
    6. Ho, W.H., 1995. "Imperfect Information, Money and Economic Growth," Working Papers 9507, University of Waterloo, Department of Economics.
    7. Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(3), pages 631-655, June.
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