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Social status and long-run effects of monetary policy in a two-sector monetary economy of endogenous growth

  • Chen, Hung-Ju

We develop a two-sector monetary economy with human capital accumulation and a cash constraint applied to both consumption and investment to examine the ways in which social status affects the impact of monetary policy on the long-run economic growth rate. Our findings suggest that the formation of human capital is an important determinant to the super-neutrality of money in the growth-rate sense. Within an economy with Lucas-type human capital formation, money is super-neutral; however, within an economy where human capital accumulation formation is more generalized, and in which both physical and human capital are used as inputs, the growth rate in money will have a negative effect on the long-run growth rate of the economy. The existence, uniqueness and saddle-path stability of balanced-growth equilibrium are also examined.

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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 61 (2011)
Issue (Month): 1 (January)
Pages: 71-79

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Handle: RePEc:eee:matsoc:v:61:y:2011:i:1:p:71-79
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