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Financial Deepening, Inflation and Economic Growth

Author

Listed:
  • Shouyong Shi

    (Department of Economics, University of Toronto, Canada)

  • Aleksander Berentsen

    (Department of Economics, University of Basel, Switzerland)

Abstract

We develop a general equilibrium framework to analyze the relationship between the operation of the financial system, inflation and economic growth. We first investigate the dynamic interactions between financial development and growth by analyzing how financial innovations affect real growth, and, in turn, growth affects the financial system. We then study how inflation affects financial deepening and economic growth. Finally, we discuss policy implications and derive optimal fiscal and monetary policies.

Suggested Citation

  • Shouyong Shi & Aleksander Berentsen, 2008. "Financial Deepening, Inflation and Economic Growth," 2008 Meeting Papers 673, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:673
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    References listed on IDEAS

    as
    1. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    2. Shouyong Shi, 2001. "Liquidity, Bargaining, and Multiple Equilibria in a Search Monetary Model," Annals of Economics and Finance, Society for AEF, vol. 2(2), pages 325-351, November.
    3. Berentsen, Aleksander & Camera, Gabriele & Waller, Christopher, 2007. "Money, credit and banking," Journal of Economic Theory, Elsevier, vol. 135(1), pages 171-195, July.
    4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    5. Juster, F Thomas & Stafford, Frank P, 1991. "The Allocation of Time: Empirical Findings, Behavioral Models, and Problems of Measurement," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 471-522, June.
    6. Shouyong Shi, 1997. "A Divisible Search Model of Fiat Money," Econometrica, Econometric Society, vol. 65(1), pages 75-102, January.
    7. Ireland, Peter N, 1994. "Money and Growth: An Alternative Approach," American Economic Review, American Economic Association, vol. 84(1), pages 47-65, March.
    Full references (including those not matched with items on IDEAS)

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