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Search, inflation and capital accumulation

  • Shi, Shouyong

This paper constructs a model to integrate the search monetary theory into a neoclassical growth model. With divisible goods and money, the model is used to examine the relationship between money growth and capital accumulation. The framework uncovers a distinct extensive effect that an increase in the money growth rate increases the frequency of successful trades by increasing the number of agents in the market. This positive extensive effect on the number of trades can dominate the conventional negative intensive effects of money growth on individuals' labor input and real money balance, in which case increasing the money growth rate increases aggregate capital and output.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-3932(99)00016-1
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 44 (1999)
Issue (Month): 1 (August)
Pages: 81-103

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Handle: RePEc:eee:moneco:v:44:y:1999:i:1:p:81-103
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. Jovanovic, Boyan, 1982. "Inflation and Welfare in the Steady State," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 561-77, June.
  2. 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.
  3. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
  4. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
  5. Li, Victor E., 1994. "Inventory accumulation in a search-based monetary economy," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 511-536, December.
  6. 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 750-77, October.
  7. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
  8. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
  9. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
  10. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
  11. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
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