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Dynamic Behavior of Capital Accumulation in a Cash-in-Advance Model

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  • Andrew B. Abel

Abstract

This paper analyzes the dynamic behavior of capital accumulationin Stockman's (1981) cash-in-advance model. If the cash-in-advance constraint applies only to consuittion, then money is superneutral along the transition path as well as in the long run. Alternatively, if the cash-in-advance constraint applies to gross investment as well as consumption, then a permanent increase in the rate of monetary growth reduces the steady state capital stock. The effect on the speed of adjustment depends on the sign of a certain simple function of the parameters of preferences and technology.

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File URL: http://www.nber.org/papers/w1549.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1549.

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Date of creation: Jan 1986
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Publication status: published as Abel, Andrew B. "Dynamic Behavior of Capital Accumulation in a Cash-in-Advance Model," Journal of Monetary Economics, Vol. 16, No. 1, July 1985, pp. 55-71.
Handle: RePEc:nbr:nberwo:1549

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  1. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
  2. Andrew B. Abel, . "Optimal Monetary Growth," Rodney L. White Center for Financial Research Working Papers 02-87, Wharton School Rodney L. White Center for Financial Research.
  3. Brock, William A., 1975. "A simple perfect foresight monetary model," Journal of Monetary Economics, Elsevier, vol. 1(2), pages 133-150, April.
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