Money Supply and Capital Accumulation on the Transition Path Revisited
Fischer (1979) and Asako (1983) analyze the sign of the correlation between the growth rate of money and the rate of capital accumulation on the transition path. Both plug a constant relative risk aversion utility (based on a Cobb-Douglas and a Leontief function, respectively) into Sidrauski's model-yet return contrasting results. The present analysis, by using a more general CES utility, presents both of those settings and conclusions as limiting cases and generates economic figures more consistent with reality (e.g., the interest rate elasticity of the money demands derived from those previous works is necessarily 1 and 0, respectively). Copyright (c) 2010 The Ohio State University.
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Volume (Year): 42 (2010)
Issue (Month): 6 (09)
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- Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-1439, November.
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- BENNETT T. McCALLUM, 2008. "How Important Is Money in the Conduct of Monetary Policy? A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1783-1790, December.
- Cysne, Rubens Penha & Turchick, David, 2009. "On the integrability of money-demand functions by the Sidrauski and the shopping-time models," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1555-1562, September.
- Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March. Full references (including those not matched with items on IDEAS)
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