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Cash-in-advance constraint with status in a neoclassical growth model

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  • Kaminoyama, Ken-ichi
  • Kawagishi, Taketo
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    Abstract

    In this paper, we assume that a cash-in-advance (CIA) constraint itself depends on relative income, which implies status. This constraint means that agents with higher income are more creditworthy and can make purchases with fewer money holdings. Under this assumption, we construct a one-sector neoclassical growth model and show that there exists a unique steady state that has saddle-path stability without specifying each function. Furthermore, we examine the effects of money growth on capital accumulation. If the status elasticity of CIA constraint is large, the Tobin effect can arise. In contrast, if it is small, the anti-Tobin effect can arise.

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    File URL: http://mpra.ub.uni-muenchen.de/38382/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38382.

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    Date of creation: 26 Apr 2012
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    Handle: RePEc:pra:mprapa:38382

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    Keywords: Cash-in-advance constraint; Status; Money growth; Neoclassical growth model; Tobin/anti-Tobin effect;

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    1. Kennickell, Arthur B & Starr-McCluer, Martha, 1997. "Household Saving and Portfolio Change: Evidence from the 1983-89 SCF Panel," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 381-99, December.
    2. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
    3. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
    4. Robert B. Avery & Gregory E. Elliehausen & Arthur B. Kennickell & Paul A. Spindt, 1987. "Changes in the use of transaction accounts and cash from 1984 to 1986," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages 179-196.
    5. Chang, Wen-ya & Hsieh, Yi-ni & Lai, Ching-chong, 2000. "Social status, inflation, and endogenous growth in a cash-in-advance economy," European Journal of Political Economy, Elsevier, vol. 16(3), pages 535-545, September.
    6. Gong, Liutang & Zou, Heng-Fu, 2001. "Money, Social Status, and Capital Accumulation in a Cash-in-Advance Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 284-93, May.
    7. Wolff, Edward N, 1983. "The Size Distribution of Household Disposable Wealth in the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 29(2), pages 125-46, June.
    8. 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.
    9. Kessler, Denis & Wolff, Edward N, 1991. "A Comparative Analysis of Household Wealth Patterns in France and the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(3), pages 249-66, September.
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