Search, Inflation, and Capital Accumulation
This paper constructs a model to integrate the search monetary theory into a neoclassical growth model. With divisible goods and money, the model is used to examine the relationship between money growth and capital accumulation. The framework uncovers a distinct extensive effect that an increase in the money growth rate increases the frequency of successful trades by increasing the number of agents in the market. This positive extensive effect on the number of trades can dominate the conventional negative intensive effects of money growth on individuals' labor input and real money balance, in which case increasing the money growth rate increases aggregate capital and output.
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|Date of creation:||Jun 1998|
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916, Queen's University, Department of Economics.
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- Shouyong Shi, 1996.
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930, Queen's University, Department of Economics.
- Jovanovic, Boyan, 1982. "Inflation and Welfare in the Steady State," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 561-77, June.
- Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
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- Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
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