Social status and long-run effects of monetary policy in a two-sector monetary economy of endogenous growth
✍ Scribed by Hung-Ju Chen
- Publisher
- Elsevier Science
- Year
- 2011
- Tongue
- English
- Weight
- 280 KB
- Volume
- 61
- Category
- Article
- ISSN
- 0165-4896
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✦ Synopsis
We develop a two-sector monetary economy with human capital accumulation and a cash constraint applied to both consumption and investment to examine the ways in which social status affects the impact of monetary policy on the long-run economic growth rate. Our findings suggest that the formation of human capital is an important determinant to the super-neutrality of money in the growth-rate sense. Within an economy with Lucas-type human capital formation, money is super-neutral; however, within an economy where human capital accumulation formation is more generalized, and in which both physical and human capital are used as inputs, the growth rate in money will have a negative effect on the long-run growth rate of the economy. The existence, uniqueness and saddle-path stability of balancedgrowth equilibrium are also examined.