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Monetary Policy in a Cash-in-Advance Economy Employment, Capital Accumulation and the Term Structure of Interest Rates

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Author Info

  • Arman Mansoorian

    (York University, Canada)

  • Mohammed Mohsin

    (University of Tennessee, USA)

Abstract

This paper studies the effects of monetary policies on employment, capital accumulation, consumption, and the term structure of interestrates in a cash-in-advance economy, where money is required for consumption expenditures. Monetary policy involves targeting the inflation rate or the nominal interest rate. The detail dynamics of the model are fully worked out As no numerical analysis is involved, we are able to identify very clearly the different channels through which monetary policy will impinge on the important macroeconomic variables.

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File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/paper-1.pdf
File Function: First version, 2002
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Bibliographic Info

Paper provided by York University, Department of Economics in its series Working Papers with number 2002_02.

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Length: 22 pages
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:yca:wpaper:2002_02

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Related research

Keywords: Employment; Capital Accumulation; Term Structure; Cash-in-Advance;

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References

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  1. Stephen J. Turnovsky, 1989. "The Term Structure of Interest Rates and the Effects of Macroeconomic Policy," NBER Working Papers 2902, National Bureau of Economic Research, Inc.
  2. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  3. Andrew B. Abel, 1986. "Dynamic Behavior of Capital Accumulation in a Cash-in-Advance Model," NBER Working Papers 1549, National Bureau of Economic Research, Inc.
  4. Turnovsky, Stephen J & Sen, Partha, 1991. "Fiscal Policy, Capital Accumulation, and Debt in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 43(1), pages 1-24, January.
  5. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-39, November.
  6. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  7. Carlstrom, Charles T. & Fuerst, Timothy S., 1995. "Interest rate rules vs. money growth rules a welfare comparison in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 247-267, November.
  8. Turnovsky, Stephen J & Miller, Marcus H, 1984. "The Effects of Government Expenditure on the Term Structure of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 16-33, February.
  9. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging Market Countries," NBER Working Papers 7618, National Bureau of Economic Research, Inc.
  10. McCafferty, Stephen, 1986. "Aggregate Demand and Interest Rates: A Macroeconomic Approach to the Term Structure," Economic Inquiry, Western Economic Association International, vol. 24(4), pages 521-33, October.
  11. Stephen J. Turnovsky, 1987. "Short-Term and Long-Term Interest Rates in a Monetary Model of a Small Open Economy," NBER Working Papers 1716, National Bureau of Economic Research, Inc.
  12. 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.
  13. Sergio Rebelo & Danyang Xie, 1997. "On the Optimality of Interest Rate Smoothing," NBER Working Papers 5947, National Bureau of Economic Research, Inc.
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Cited by:
  1. Arman Mansoorian & Mohammed Mohsin, 2002. "On the Implications of Different Cash-in-Advance Constraints With Endogenous Labour," Working Papers 2002_03, York University, Department of Economics.

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