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Inflation and Balanced-Path Growth with Alternative Payment Mechanisms

Listed author(s):
  • Max Gillman

    ()

    (Central European University, Department of Economics)

  • Michal Kejak

    ()

    (CERGE-EI)

The paper shows that contrary to conventional wisdom an endogenous growth economy with human capital and alternative payment mechanisms can robustly explain major facets of the long run inflation experience. A negative inflation-growth relation is explained, including a striking nonlinearity found re-peatedly in empirical studies. A set of Tobin (1965) effects are also explained and, further, linked in magnitude to the growth effects through the interest elasticity of money demand. Undis-closed previously, this link helps fill out the intuition of how the inflation experience can be plausibly explained in a robust fashion with a model extended to include credit as a payment mechanism.

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File URL: http://econ.core.hu/doc/dp/dp/mtdp0402.pdf
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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0402.

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Length: 40 pages
Date of creation: Feb 2004
Handle: RePEc:has:discpr:0402
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  12. Max Gillman, 1995. "Comparing Partial And General Equilibrium Estimates Of The Welfare Cost Of Inflation," Contemporary Economic Policy, Western Economic Association International, vol. 13(4), pages 60-71, October.
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  14. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April.
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  16. Mohsin S. Khan & Abdelhak S Senhadji, 2000. "Financial Development and Economic Growth; An Overview," IMF Working Papers 00/209, International Monetary Fund.
  17. Max Gillman, 2000. "On the Optimality of Restricting Credit: Inflation Avoidance and Productivity," The Japanese Economic Review, Japanese Economic Association, vol. 51(3), pages 375-390, 09.
  18. Max Gillman & Michal Kejak, 2005. "Contrasting Models of the Effect of Inflation on Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 113-136, 02.
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  31. Max Gillman & Mark N. Harris, 2010. "The effect of inflation on growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(4), pages 697-714, October.
  32. Gillman Max K & Yerokhin Oleg, 2005. "Ramsey-Friedman Optimality with Banking Time," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-24, July.
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  35. Paul Gomme, 1991. "Money and growth revisited," Discussion Paper / Institute for Empirical Macroeconomics 55, Federal Reserve Bank of Minneapolis.
  36. Max Gillman & Michal Kejak, 2004. "The Demand for Bank Reserves and Other Monetary Aggregates," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 518-533, July.
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