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- Title
RANDOM MATCHING AND MONEY IN THE NEOCLASSICAL GROWTH MODEL: SOME ANALYTICAL RESULTS.
- Authors
Waller, Christopher J.
- Abstract
I use the monetary version of the neoclassical growth model developed by Aruoba, Waller, and Wright [Journal of Monetary Economics (2011)] to study the properties of the model when there is exogenous growth. I first consider the planner's problem, and then the equilibrium outcome in a monetary economy. I do so by first using proportional bargaining to determine the terms of trade and then considering competitive price taking. I obtain closed-form solutions for all variables along the balanced growth path in all cases. I then derive closed-form solutions for the transition paths under the assumption of full depreciation and, in the monetary economy, a particular nonstationary interest rate policy. The key result is that inflation is damaging to per capita income levels along the balanced growth path and to short-run growth of the economy.
- Subjects
MATHEMATICAL models of economic development; MONETARY theory; PRICE inflation; EFFECT of inflation on income; DEPRECIATION; NEGOTIATION
- Publication
Macroeconomic Dynamics, 2011, Vol 15, Issue S2, p293
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100510000726