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Economic Stability and Interest-Rate Controls in an Open-Economy Model with Productive Money

Author

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  • Seiya Fujisaki

    (Department of Education, Shinshu University)

Abstract

We analyze the relation between interest-rate controls and equilibrium determinacy in a two-country model in which money is employed as a factor of production. Given this specification, holding cash generates an opportunity cost. Therefore, equilibrium can be indeterminate even if both countries demonstrate additive-separable utilities between consumption and non-productive money.

Suggested Citation

  • Seiya Fujisaki, 2012. "Economic Stability and Interest-Rate Controls in an Open-Economy Model with Productive Money," Economics Bulletin, AccessEcon, vol. 32(4), pages 3053-3060.
    • Handle: RePEc:ebl:ecbull:eb-12-00446
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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P292.pdf
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    References listed on IDEAS

    as
    1. Allen Sinai & Houston H. Stokes, 1989. "Money Balances in the Production Function: A Retrospective Look," Eastern Economic Journal, Eastern Economic Association, vol. 15(4), pages 349-363, Oct-Dec.
    2. Fujisaki, Seiya, 2012. "Interest Rate Control Rules and Macroeconomic Stability in a Heterogeneous Two-Country Model," MPRA Paper 37017, University Library of Munich, Germany.
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    Cited by:

    1. Fujisaki, Seiya, 2016. "Equilibrium Determinacy and Policy Rules : Role of Productive Money and Government Expenditure," MPRA Paper 69834, University Library of Munich, Germany.

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    More about this item

    Keywords

    Taylor rule; productive money; equilibrium determinacy; open economy.;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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