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The Role of Monetary Policy in Eliminating the Non-Convergent Dynamic Paths

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  • Shin-ichi Fukuda

Abstract

This paper investigates effects of money growth on the non-convergent dynamic paths in a model of money in the utility function with liquidity-in-advance. We show that the effects generally depend on the form of utility function of money. That is, when the relative risk aversion is decreasing in money, a period-doubling bifurcation is always associated with a high money supply growth. However, when the relative risk aversion is increasing in money, it is ambiguous whether it is associated with a high or low money supply growth. The paper also investigates the same problem in a "shopping costs" model. We show that the results essentially depend on the form of shopping cost function.

Suggested Citation

  • Shin-ichi Fukuda, 1992. "The Role of Monetary Policy in Eliminating the Non-Convergent Dynamic Paths," Discussion Paper Series a258, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hituec:a258
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    Cited by:

    1. 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.
    2. 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.
    3. Francisco J. Navarro-González & Yolanda Villacampa, 2021. "A Foundation for Logarithmic Utility Function of Money," Mathematics, MDPI, vol. 9(6), pages 1-8, March.
    4. 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.
    5. 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.

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