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Money and Specialization in a Neoclassical Growth Model

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  • Ghossoub, Edgar A
  • Reed, Robert R

Abstract

This paper studies the links between money, specialization, and capital accumulation in a neoclassical growth framework. For tractability, the transactions role of money is introduced through a cash-in-advance constraint. In contrast to the standard cash-in-advance model, an individual's reliance on money balances for transactions is endogenous through the choice of specialization. Although the cash-in-advance constraint only applies to consumption, the model exhibits a reverse-Tobin effect. We conclude by discussing the implications of the model for the welfare costs of inflation.

Suggested Citation

  • Ghossoub, Edgar A & Reed, Robert R, 2005. "Money and Specialization in a Neoclassical Growth Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 969-975, October.
    • Handle: RePEc:mcb:jmoncb:v:37:y:2005:i:5:p:969-75
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    Cited by:

    1. Basci, Erdem & Erdogan, Ayse M. & Saglam, Ismail, 2006. "Money, Tobin Effect, and Incerasing Returns," MPRA Paper 1904, University Library of Munich, Germany.
    2. Robert R. Reed & Edgar A. Ghossoub, 2013. "Thresholds and the Welfare Cost of Inflation," Working Papers 0186eco, College of Business, University of Texas at San Antonio.
    3. Anne Jurkat & Rainer Klump, 2009. "Endogenous Specialization and Factor Substitution in a Monetary Growth Model," DEGIT Conference Papers c014_036, DEGIT, Dynamics, Economic Growth, and International Trade.

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