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Money and Growth: Some Old Theorems from a New Perspective

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  • JEFFREY CARMICHAEL

Abstract

This paper reconsiders the effect of the rate of monetary expansion on the real growth path of the economy. The analysis uses an overlapping‐generations model with production and intergenerational bequests. The first objective is to define the set of necessary conditions under which money will be superneutral. These conditions are shown to be very restrictive. The second objective is to show that, if money is not superneutral, Tobin's original intuition on the subject, namely that a rise in the rate of monetary expansion raises the capital intensity, can be derived from an optimizing model under certain conditions.

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  • Jeffrey Carmichael, 1982. "Money and Growth: Some Old Theorems from a New Perspective," The Economic Record, The Economic Society of Australia, vol. 58(4), pages 386-394, December.
    • Handle: RePEc:bla:ecorec:v:58:y:1982:i:4:p:386-394
    DOI: 10.1111/j.1475-4932.1982.tb00390.x
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    References listed on IDEAS

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    1. Thomas J. Sargent, 1973. "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(2), pages 429-480.
    2. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-1439, November.
    3. Dornbusch, Rudiger & Frenkel, Jacob A, 1973. "Inflation and Growth: Alternative Approaches," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 141-156, Part I Fe.
    4. Brock, William A, 1974. "Money and Growth: The Case of Long Run Perfect Foresight," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(3), pages 750-777, October.
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    Cited by:

    1. Petrucci, Alberto, 1997. "Money, Labour Supply and Growth in a Liquidity Costs Economy," Discussion Papers 9707, University of Exeter, Department of Economics.
    2. Petrucci, Alberto, 2003. "Money, endogenous fertility and economic growth," Journal of Macroeconomics, Elsevier, vol. 25(4), pages 527-539, December.
    3. Maxim Nikitin & Steven Russell, 2006. "Monetary policy arithmetic: reconciling theory with evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(1), pages 348-374, February.
    4. Petrucci, Alberto, 1999. "Inflation and capital accumulation in an OLG model with money in the production function," Economic Modelling, Elsevier, vol. 16(4), pages 475-487, December.
    5. Amusa, Kafayat & Gupta, Rangan & Karolia, Shaakira & Simo-Kengne, Beatrice D., 2013. "The long-run impact of inflation in South Africa," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 798-812.
    6. Frederick H. Wallace & Gary L. Shelley, 2004. "Long Run Neutrality and Superneutrality of Money: Aggregate and Sectoral Tests for Nicaragua," Macroeconomics 0402004, University Library of Munich, Germany.

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