Anticipated Inflation, Liquidity Costs and the Tobin Effect

This paper analyses the steady‐state effects of inflation on capital accumulation within an optimizing monetary growth model with liquidity costs and an endogenous labour supply. It is assumed that consumption and leisure are perfect complements in the preferences of the representative agent. The particular environment considered, despite the results obtained by the growing literature on inflation and growth with endogenous labour effort, gives support to the Tobin effect, i.e. a positive effect of the money growth rate on capital, labour and output. (J.E.L.: O42).