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

Author

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  • Max Gillman

    ()

  • Michal Kejak

Abstract

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.

Suggested Citation

  • Max Gillman & Michal Kejak, 2007. " Inflation, Financial Development and Human Capital-Based Endogenous Growth: an Explanation of Ten Empirical Findings," CDMA Conference Paper Series 0703, Centre for Dynamic Macroeconomic Analysis.
  • Handle: RePEc:san:cdmacp:0703
    as

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    File URL: https://www.st-andrews.ac.uk/CDMA/papers/cp0703.pdf
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    References listed on IDEAS

    as
    1. Alex Trew, 2006. "Finance and Growth: A Critical Survey," The Economic Record, The Economic Society of Australia, vol. 82(259), pages 481-490, December.
    2. 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.
    3. Szilárd Benk & Max Gillman & Michal Kejak, 2008. "Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1281-1293, September.
    4. 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.
    5. 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.
    6. John H. Boyd & Bruce A. Champ, 2006. "Inflation, banking, and economic growth," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
    7. 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.
    8. Jonathan B. Berk & Richard C. Green, 2004. "Mutual Fund Flows and Performance in Rational Markets," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1269-1295, December.
    9. Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2005. "The Effect of Financial Development on Convergence: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 173-222.
    10. J. Christina Wang & Susanto Basu & John G. Fernald, 2009. "A General-Equilibrium Asset-Pricing Approach to the Measurement of Nominal and Real Bank Output," NBER Chapters,in: Price Index Concepts and Measurement, pages 273-320 National Bureau of Economic Research, Inc.
    11. John Driffill, 2003. "Growth and Finance," Manchester School, University of Manchester, vol. 71(4), pages 363-380, July.
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    13. 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.
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    17. 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, January.
    18. 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.
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    22. Jakob B. Madsen, 2003. "Inflation and Investment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 375-397, September.
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    More about this item

    Keywords

    Inflation; financial development; growth; exchange credit production;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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