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Dynamic behavior of capital accumulation in a cash-in-advance model

  • Abel, Andrew B.

This paper analyzes the dynamic behavior of capital accumulationin Stockman's (1981) cash-in-advance model. If the cash-in-advance constraint applies only to consuittion, then money is superneutral along the transition path as well as in the long run. Alternatively, if the cash-in-advance constraint applies to gross investment as well as consumption, then a permanent increase in the rate of monetary growth reduces the steady state capital stock. The effect on the speed of adjustment depends on the sign of a certain simple function of the parameters of preferences and technology.

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File URL: http://www.sciencedirect.com/science/article/B6VBW-4CB778K-J/2/4d8b0aa18335d54b47f932a7c20825e5
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 16 (1985)
Issue (Month): 1 (July)
Pages: 55-71

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Handle: RePEc:eee:moneco:v:16:y:1985:i:1:p:55-71
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-39, November.
  2. Andrew B. Abel, . "Optimal Monetary Growth," Rodney L. White Center for Financial Research Working Papers 2-87, Wharton School Rodney L. White Center for Financial Research.
  3. 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.
  4. Brock, William A., 1975. "A simple perfect foresight monetary model," Journal of Monetary Economics, Elsevier, vol. 1(2), pages 133-150, April.
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