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Money Supply and Capital Accumulation on the Transition Path Revisited
Author(s) -
CYSNE RUBENS PENHA,
TURCHICK DAVID
Publication year - 2010
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2010.00325.x
Subject(s) - economics , sign (mathematics) , interest rate , limiting , money supply , path (computing) , capital (architecture) , function (biology) , econometrics , constant (computer programming) , mathematical economics , microeconomics , monetary economics , mathematics , computer science , engineering , mechanical engineering , mathematical analysis , programming language , archaeology , evolutionary biology , biology , history
Fischer (1979) and Asako (1983) analyze the sign of the correlation between the growth rate of money and the rate of capital accumulation on the transition path. Both plug a constant relative risk aversion utility (based on a Cobb–Douglas and a Leontief function, respectively) into Sidrauski's model—yet return contrasting results. The present analysis, by using a more general CES utility, presents both of those settings and conclusions as limiting cases and generates economic figures more consistent with reality (e.g., the interest rate elasticity of the money demands derived from those previous works is necessarily 1 and 0, respectively).