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Inflation and Balanced-Path Growth with Alternative Payment Mechanisms

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Listed:
  • Max Gillman

    (Central European University, Department of Economics)

  • Michal Kejak

    (CERGE-EI)

Abstract

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.

Suggested Citation

  • Max Gillman & Michal Kejak, 2004. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," CERS-IE WORKING PAPERS 0402, Institute of Economics, Centre for Economic and Regional Studies.
  • Handle: RePEc:has:discpr:0402
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    File URL: http://econ.core.hu/doc/dp/dp/mtdp0402.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Human capital; cash-in-advance; interest-elasticity; credit production;
    All these keywords.

    JEL classification:

    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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