Open AccessInflation, Growth, and Impatience in a Generalized Cash-in-Advance Economy
Author(s) -
Kenji Miyazaki
Publication year - 2012
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v3n3p2
Subject(s) - economics , consumption (sociology) , discounting , uniqueness , friedman rule , monetary economics , inflation (cosmology) , cash , equivalence (formal languages) , monetary policy , function (biology) , constraint (computer aided design) , time preference , welfare , investment (military) , microeconomics , macroeconomics , mathematics , finance , social science , discrete mathematics , law , mathematical analysis , sociology , theoretical physics , biology , geometry , evolutionary biology , political science , market economy , physics , politics
In this note, we consider a cash-in-advance (CIA) economy in which the CIA constraint applies to not only consumption but also to all or part of investment and where the discounting rate is a function of consumption. We use this economy to investigate the effects of monetary growth on capital, money, consumption, and welfare. We find that as long as the condition assuring the uniqueness of the steady state holds, the effect of monetary growth on all of these variables is negative, though mitigated by the positive slope of the discounting function. Using this result, we establish a qualitative equivalence between the money-in-the-utility, transaction-cost, and CIA models