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On the Implications of Different Cash-in-Advance Constraints With Endogenous Labour

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Author Info

  • Arman Mansoorian

    (York University, Canada)

  • Mohammed Mohsin

    (University of Tennessee, USA)

Abstract

It is shown that, in contrast to models with fixed labour, a change in monetary policy involving an increase in the inflation rate would have the same qualitative effects on steady state capital, consumption, and employment, regardless of whether only consumption or both consumption and investment are subject to Cash-in-Advance (CIA) constraints. The dynamics of the two models regarding employment and capital are also very similar qualitatively. Only the dynamics of consumption are sligtly different. Some numerical analysis is also carried out to gauge the quantitative difference between the two models.

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File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/paper-2.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_03.

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Length: 20 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:yca:wpaper:2002_03

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Related research

Keywords: Monetary Policy; Cash-in-advance; Employment; Capital Accumulation;

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References

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  1. Abel, Andrew B., 1985. "Dynamic behavior of capital accumulation in a cash-in-advance model," Journal of Monetary Economics, Elsevier, vol. 16(1), pages 55-71, July.
  2. Arman Mansoorian & Mohammed Mohsin, 2002. "Monetary Policy in a Cash-in-Advance Economy Employment, Capital Accumulation and the Term Structure of Interest Rates," Working Papers 2002_02, York University, Department of Economics.
  3. 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.
  4. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging Market Countries," NBER Working Papers 7618, National Bureau of Economic Research, Inc.
  5. 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.
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