On the Implications of Different Cash-in-Advance Constraints With Endogenous Labour
It is shown that, in contrast to models with fixed labour, a change in monetary policy involving an increase in the inflation rate would have the same qualitative effects on steady state capital, consumption, and employment, regardless of whether only consumption or both consumption and investment are subject to Cash-in-Advance (CIA) constraints. The dynamics of the two models regarding employment and capital are also very similar qualitatively. Only the dynamics of consumption are sligtly different. Some numerical analysis is also carried out to gauge the quantitative difference between the two models.
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- Arman Mansoorian & Mohammed Mohsin, 2004.
"Monetary policy in a cash-in-advance economy: employment, capital accumulation, and the term structure of interest rates,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 37(2), pages 336-352, May.
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- 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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