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Cash-in-advance constraint, optimal monetary policy, and human capital accumulation

Listed author(s):
  • Yanagihara, Mitsuyoshi
  • Lu, Chen
Registered author(s):

    This paper investigates optimal monetary policy in an overlapping-generations model with endogenous growth fueled by the accumulation of human capital and under a cash-in-advance constraint. We consider the case where the government finances public education fully by seigniorage. Three main results are obtained. First, there exists an optimal money growth rate that maximizes the economic growth rate along the steady growth path. Second, on this path, the Laffer curve of seigniorage takes the maximum. Finally, the money growth rate for maximizing seigniorage along the steady growth path, which also leads to maximization of the economic growth rate, is lower than that for maximizing seigniorage in the present period.

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    File URL: http://www.sciencedirect.com/science/article/pii/S109094431300029X
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    Article provided by Elsevier in its journal Research in Economics.

    Volume (Year): 67 (2013)
    Issue (Month): 3 ()
    Pages: 278-288

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    Handle: RePEc:eee:reecon:v:67:y:2013:i:3:p:278-288
    DOI: 10.1016/j.rie.2013.06.001
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622941

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