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Inflation, Financial Development and Human Capital-Based Endogenous Growth: an Explanation of Ten Empirical Findings

  • Max Gillman

    ()

  • Michal Kejak
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    The paper presents a general equilibrium that can explain ten related sets of empirical results, providing a unified approach to understand usually disparate effects typically treated separately. These are grouped into two sets, one on financial development, investment and inflation, and one on inflations effect on other economy-wide variables such as growth, real interest rates, employment, and money demand. The unified approach also contributes a systematic explanation of certain nonlinearities that are found across these results, as based on the production function for financial intermediary services and the resultant money demand function.

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    File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/cp0703.pdf
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    Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Conference Paper Series with number 0703.

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    Date of creation: Nov 2007
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    Handle: RePEc:san:cdmacp:0703
    Contact details of provider: Postal: Department of Economics, University of St. Andrews, Fife KY16 9AL
    Phone: 01334 462420
    Fax: 01334 462444
    Web page: http://www.st-andrews.ac.uk/cdma
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    1. Peter N. Ireland, 1998. "Does the Time-Consistency Problem Explain the Behavior of Inflation in the United States?," Boston College Working Papers in Economics 415, Boston College Department of Economics.
    2. Ahmed, Shaghil & Rogers, John H., 2000. "Inflation and the great ratios: Long term evidence from the U.S," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 3-35, February.
    3. Nelson C. Mark & Donggyu Sul, 2002. "Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand," NBER Technical Working Papers 0287, National Bureau of Economic Research, Inc.
    4. Max Gillman & Mark N. Harris, 2004. "Inflation, Financial Development and Endogenous Growth," Monash Econometrics and Business Statistics Working Papers 24/04, Monash University, Department of Econometrics and Business Statistics.
    5. Howitt, Peter & Mayer-Foulkes, David & Aghion, Philippe, 2005. "The Effect of Financial Development on Convergence: Theory and Evidence," Scholarly Articles 4481509, Harvard University Department of Economics.
    6. Clark, Jeffrey A, 1984. "Estimation of Economies of Scale in Banking Using a Generalized Functional Form," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 53-68, February.
    7. Max Gillman & Mark N. Harris & László Mátyás, 2004. "Inflation and growth: Explaining a negative effect," Empirical Economics, Springer, vol. 29(1), pages 149-167, January.
    8. 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.
    9. Szilárd Benk & Max Gillman & Michal Kejak, 2007. "Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks," MNB Working Papers 2007/5, Magyar Nemzeti Bank (the central bank of Hungary).
    10. Li, Victor E, 2000. "Household Credit and the Monetary Transmission Mechanism," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 335-56, August.
    11. Hancock, Diana, 1985. "The Financial Firm: Production with Monetary and Nonmonetary Goods," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 859-80, October.
    12. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
    13. Byrne, Joseph P. & Davis, E. Philip, 2004. "Permanent and temporary inflation uncertainty and investment in the United States," Economics Letters, Elsevier, vol. 85(2), pages 271-277, November.
    14. Max Gillman & Michal Kejak, 2005. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," Economic Journal, Royal Economic Society, vol. 115(500), pages 247-270, 01.
    15. Alex Trew, 2005. "Finance and Growth: A Critical Survey," CDMA Working Paper Series 200507, Centre for Dynamic Macroeconomic Analysis, revised 15 Apr 2006.
    16. Jonathan B. Berk & Richard C. Green, 2002. "Mutual Fund Flows and Performance in Rational Markets," FAME Research Paper Series rp100, International Center for Financial Asset Management and Engineering.
    17. Max Gillman & Mark N. Harris, 2004. "Inflation, Financial Development and Growth in Transition Countries," Monash Econometrics and Business Statistics Working Papers 23/04, Monash University, Department of Econometrics and Business Statistics.
    18. John Driffill, 2003. "Growth and Finance," Manchester School, University of Manchester, vol. 71(4), pages 363-380, 07.
    19. Rapach, David E, 2003. " International Evidence on the Long-Run Impact of Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(1), pages 23-48, February.
    20. Canzoneri, Matthew B. & Diba, Behzad T., 2005. "Interest rate rules and price determinacy: The role of transactions services of bonds," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 329-343, March.
    21. Jakob B. Madsen, 2003. "Inflation and Investment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 375-397, 09.
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