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The Role of Monetary Policy in Eliminating Nonconvergent Dynamic Paths

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  • Fukuda, Shin-ichi

Abstract

This paper investigates the effects of money growth on nonconvergent dynamic paths in a money-in-utility model. When relative risk aversion is decreasing in money, period-two cycle and sunspot equilibria are always associated with a high rate of money supply growth. However, when relative risk aversion is increasing in money, it is ambiguous whether they are associated with either high or low rate of money supply growth. The paper also investigates the same problem in a transaction cost model. The author shows that the results essentially depend on the form of the transaction cost function. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Fukuda, Shin-ichi, 1997. "The Role of Monetary Policy in Eliminating Nonconvergent Dynamic Paths," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 249-261, February.
  • Handle: RePEc:ier:iecrev:v:38:y:1997:i:1:p:249-61
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    Cited by:

    1. Fukuda, Shin-ichi, 1998. "Sunspot equilibria and periodic cycles under idiosyncratic uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 127-138, July.
    2. Guo, Jang-Ting & Lansing, Kevin J., 2002. "Fiscal Policy, Increasing Returns, And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 6(5), pages 633-664, November.
    3. Airaudo, Marco & Zanna, Luis-Felipe, 2012. "Interest rate rules, endogenous cycles, and chaotic dynamics in open economies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1566-1584.
    4. Fukuda, Shin-ichi, 2004. "Extraneous shocks and international linkage of business cycles in a two-country monetary model," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 389-409, July.
    5. Francisco J. Navarro-González & Yolanda Villacampa, 2021. "A Foundation for Logarithmic Utility Function of Money," Mathematics, MDPI, vol. 9(6), pages 1-8, March.

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