Multiple Equilibria in the Endogenous Economic Growth Model with the Cash-in-Advance Constraint
AbstractIn previous studies, it is well known that equilibria can be indeterminate when the cash-in-advance constraint is binding. This paper extends these previous studies to the case where the economy grows endogenously. The extension is particularly noteworthy because temporarily different growth rates can make the levels of capital stocks persistently different in the endogenous growth model. We show that when the cash-in-advance constraint applies only to consumption, multiple equilibrium paths are more likely outcome in the endogenous growth economy. We also show that when the equilibrium path is a sunspot equilibrium, a deviation from the balanced growth path can accelerate the expected growth rates of consumption both in the short-run and in the long-run. However, any deviation from the balanced growth path never improves social welfare and requires the role of discretionary monetary policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number 97-F-11.
Length: 22 pages
Date of creation: Mar 1997
Date of revision:
Contact details of provider:
Postal: Hongo 7-3-1, Bunkyo-ku, Tokyo 113-0033
Web page: http://www.cirje.e.u-tokyo.ac.jp/index.html
More information through EDIRC
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CIRJE administrative office).
If references are entirely missing, you can add them using this form.