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Monetary Expansion and Converging Speed in a Growing Economy

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  • Mino, Kazuo

Abstract

This paper explores the effect of monetary policy on the speed of convergence. Using a neoclassical monetary growth model with a cash-in-advance constraint, we conduct numerical evaluation of the effect of changes in the growth rate of money supply on the converging speed of the economy. We find that, in contrast to fiscal actions, a change in monetary policy may produce little impact on the converging speed. This result indicates that the growth effect of inflation established in the theoretical models of money and growth would be extremely small, if we evaluated it quantitatively.

Suggested Citation

  • Mino, Kazuo, 2000. "Monetary Expansion and Converging Speed in a Growing Economy," MPRA Paper 17011, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17011
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    References listed on IDEAS

    as
    1. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-1439, November.
    2. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    3. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
    4. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    5. Rebelo, Sergio & Xie, Danyang, 1999. "On the optimality of interest rate smoothing," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 263-282, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    monetary growth; speed of convergence; neoclassical growth model;
    All these keywords.

    JEL classification:

    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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