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Inflation and Growth: Pecuniary Transactions Costs and Qualitative Equivalence

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  • Zhang, Junxi

Abstract

This paper develops a pecuniary transactions costs (TC) approach to reexamine the principal relationships and results concerning inflation and growth. In a model with a general TC function and an endogenous labor-leisure choice, we consider four special cases by distinguishing among money as (1) a consumption good, (2) a production good, (3) an investment good, and (4) a consumption good as well as an investment good. Under some weaker conditions as in related studies, a reversed Tobin effect obtains for all cases: a high monetary growth rate leads to lower steady-state capital, labor. consumption, and real money balances. These findings suggest that a pecuniary TC model is qualitatively equivalent to alternative models in the literature.

Suggested Citation

  • Zhang, Junxi, 2000. "Inflation and Growth: Pecuniary Transactions Costs and Qualitative Equivalence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 1-12, February.
  • Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:1:p:1-12
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    Cited by:

    1. Klump, Rainer, 2003. "Inflation, factor substitution and growth," Working Paper Series 280, European Central Bank.
    2. Ingrid Groessl & Ulrich Fritsche, 2006. "The Store-of-Value-Function of Money as a Component of Household Risk Management," Macroeconomics and Finance Series 200606, University of Hamburg, Department of Socioeconomics.
    3. Luciano Fanti, 2012. "Fertility and money in an OLG model," Discussion Papers 2012/145, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Been-Lon Chen & Mei Hsu & Chia-Hui Lu, 2008. "Inflation and Growth: Impatience and a Qualitative Equivalence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1309-1323, September.
    5. Piotr Ciżkowicz & Marcin Hołda & Andrzej Rzońca, 2009. "Inflation and investment in monetary growth models," Bank i Kredyt, Narodowy Bank Polski, vol. 40(6), pages 9-40.
    6. Shu-Hua Chen, 2015. "Fiscal and Monetary Policies in a Transactions-Based Endogenous Growth Model with Imperfect Competition," The Japanese Economic Review, Japanese Economic Association, vol. 66(1), pages 89-111, March.
    7. Suen, Ming-Hon & Yip, Chong K., 2005. "Superneutrality, indeterminacy and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 579-595, December.
    8. Apergis, Nicholas, 2004. "Inflation, output growth, volatility and causality: evidence from panel data and the G7 countries," Economics Letters, Elsevier, vol. 83(2), pages 185-191, May.
    9. Ching-chong Lai & Chi-ting Chin, 2010. "(In)determinacy, increasing returns, and the optimality of the Friedman rule in an endogenously growing open economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(1), pages 69-100, July.

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