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Title:The cash-in-advance constraint in monetary growth models PDF Logo
Authors:Heer, Burkhard
Maussner, Alfred
Issue Date:2011
Series/Report no.:CESifo working paper: Fiscal Policy, Macroeconomics and Growth 3647
Abstract:In most monetary models of economic growth, higher long-run inflation is associated with a decline in the growth rate and employment. We show that this result is sensitive with respect to the specification of the cash-in-advance constraint. We consider three types of endogenous growth models: 1) the AK-model, 2) the Lucas (1990) supply-side model, and 3) the two-sector model of Jones and Manuelli (1995). With the standard cash-in-advance constraint on consumption, higher inflation results in lower growth and employment in all three models, while, in the cash-credit good economy of Dotsey and Ireland (1996), the effect is the exact opposite.
Subjects:inflation
growth
costly credit
search unemployment
JEL:O42
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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