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Effects of monetary transactions costs on economic growth

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  • Watanabe, Akane
  • Yakita, Akira

Abstract

This study explores the effects of monetary transaction costs on economic growth in a closed overlapping generations economy with cash-in-advance constraints. Working generations can also hold interest-bearing capital claims. Economic growth is powered by an engine of learning-by-doing and knowledge spillover among workers. The results indicate that reductions in transaction costs raise the balanced growth rate and possibly reduce long-term inflation and nominal interest rates.

Suggested Citation

  • Watanabe, Akane & Yakita, Akira, 2023. "Effects of monetary transactions costs on economic growth," Research in Economics, Elsevier, vol. 77(2), pages 221-225.
    • Handle: RePEc:eee:reecon:v:77:y:2023:i:2:p:221-225
    DOI: 10.1016/j.rie.2023.02.003
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    References listed on IDEAS

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    1. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(4), pages 545-556.
    2. Christian Pfister, 2019. "Central Bank Digital Currency:One, Two or None?," Working papers 732, Banque de France.
    3. Crettez, Bertrand & Michel, Philippe & Wigniolle, Bertrand, 1999. "Cash-in-Advance Constraints in the Diamond Overlapping Generations Model: Neutrality and Optimality of Monetary Policies," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 431-452, July.
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    More about this item

    Keywords

    Transactions costs; Cash-in-advance constraint; Balanced growth;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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