Monetary Expansion and Converging Speed in a Growing Economy
This paper explores the effect of monetary policy on the speed of convergence. Using a neoclassical monetary growth model with a cash-in-advance constraint, we conduct numerical evaluation of the effect of changes in the growth rate of money supply on the converging speed of the economy. We find that, in contrast to fiscal actions, a change in monetary policy may produce little impact on the converging speed. This result indicates that the growth effect of inflation established in the theoretical models of money and growth would be extremely small, if we evaluated it quantitatively.
|Date of creation:||May 2000|
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Web page: https://mpra.ub.uni-muenchen.de
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- Sergio Rebelo & Danyang Xie, 1997. "On the Optimality of Interest Rate Smoothing," NBER Working Papers 5947, National Bureau of Economic Research, Inc.
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