Long-Run Impacts of Inflation Tax with Endogenous Capital Depreciation
AbstractThis paper examines the long-run impact of inflation tax in the context of a generalized Ak growth model in which the rate of capital depreciation is endogenously determined. It is assumed that the rate of capital depreciation positively depends on capital utilization rate and negatively depends on maintenance spending. Money is introduced via a cash in advance constraint that may apply to the maintenance expenditure as well as to consumption and investment spending. We find that the long-run effects of inflation tax are more complex than those obtained in the monetary Ak growth model with a fixed capital depreciation rate. In particular, the relation between inflation and growth is highly sensitive to the specifications of the capital depreciation technology as well as to the forms of cash-in-advance constraint.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16657.
Date of creation: 13 Jul 2009
Date of revision:
cash-in-advance constraint; AK growth model; endogenous capital depreciation; maintenance expenditures;
Other versions of this item:
- Seiya Fujisaki & Kazuo Mino, 2010. "Long-Run Impacts of Inflation Tax with Endogenous Capital Depreciation," Economics Bulletin, AccessEcon, vol. 30(1), pages 808-816.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-08-16 (Accounting & Auditing)
- NEP-ALL-2009-08-16 (All new papers)
- NEP-DGE-2009-08-16 (Dynamic General Equilibrium)
- NEP-MAC-2009-08-16 (Macroeconomics)
- NEP-MON-2009-08-16 (Monetary Economics)
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