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Long-Run Impacts of Inflation Tax in the Presence of Multiple Capital Goods

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  • Fujisaki, Seiya
  • Mino, Kazuo

Abstract

This paper examines the long-run impact of inflation tax in the context of a generalized Ak growth model in which the production technology uses two types of capital stocks under a constant-returns-to-scale technology. We find hat unless investment expenditure for each type of capital is subject to the same degree of cash-in-advance constraint, a change in the money growth rate affects the steady-state level of factor intensity. It is shown that if the balanced-growth path is uniquely given, we still have a negative long-run relationship between money growth and the growth rate of real income. However, due to the endogenous determination of the factor intensity, the negative relation between the velocity of money and the rate of inflation may not be established.

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File URL: http://mpra.ub.uni-muenchen.de/16964/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16964.

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Date of creation: Jun 2009
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Handle: RePEc:pra:mprapa:16964

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Keywords: maintenance expenditures; endogenous Growth; cash-in-advance constraint; inflation tax;

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References

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  1. repec:ebl:ecbull:v:5:y:2008:i:13:p:1-7 is not listed on IDEAS
  2. Jha, Sailesh K. & Wang, Ping & Yip, Chong K., 2002. "Dynamics in a transactions-based monetary growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 611-635, April.
  3. repec:ebl:ecbull:v:5:y:2004:i:2:p:1-7 is not listed on IDEAS
  4. Suen, Ming-Hon & Yip, Chong K., 2005. "Superneutrality, indeterminacy and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 579-595, December.
  5. Jang-Ting Guo & Shu-Hua Chen, 2008. "On the growth and velocity effects of money," Economics Bulletin, AccessEcon, vol. 5(13), pages 1-7.
  6. repec:ebl:ecbull:v:5:y:2007:i:11:p:1-7 is not listed on IDEAS
  7. Itaya, Jun-Ichi & Mino, Kazuo, 2007. "Technology, Preference Structure, And The Growth Effect Of Money Supply," Macroeconomic Dynamics, Cambridge University Press, vol. 11(05), pages 589-612, November.
  8. Chen, Shu-Hua & Guo, Jang-Ting, 2008. "Velocity of money, equilibrium (in)determinacy and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1085-1096, September.
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Cited by:
  1. Seiya Fujisaki & Kazuo Mino, 2010. "Long-Run Impacts of Inflation Tax with Endogenous Capital Depreciation," Economics Bulletin, AccessEcon, vol. 30(1), pages 808-816.

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