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Long-Run Impacts of Inflation Tax in the Presence of Maintenance Expenditures

Author

Listed:
  • Seiya Fujisaki

    (Graduate School of Economics, Osaka University)

  • Kazuo Mino

    (Institute of Economic Research, Kyoto University)

Abstract

This paper examines the long-run impact of inflation tax in the context of a generalized Ak growth model in which the rate of capital depreciation is endogenously determined. We assume that the rate of capital depreciation positively depends on capital utilization rate and negatively depends on maintenance expenditures. Money is introduced via a cash-in-advance constraint that may apply to the maintenance expenditures as well as to consumption and investment spendings. We find that the long-run effects of inflation tax are more complex than those obtained in the monetary Ak growth model with a fixed capital depreciation rate. In particular, the relation between inflation and growth is highly sensitive to the specification of the capital depreciation technology as well as to the forms of cash-in-advance constraints.

Suggested Citation

  • Seiya Fujisaki & Kazuo Mino, 2009. "Long-Run Impacts of Inflation Tax in the Presence of Maintenance Expenditures," KIER Working Papers 677, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:677
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP677.pdf
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    More about this item

    Keywords

    maintenance expenditures; endogenous growth; inflation tax; cash-in-advance constraints;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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