RANDOM MATCHING AND MONEY IN THE NEOCLASSICAL GROWTH MODEL: SOME ANALYTICAL RESULTS
I use the monetary version of the neoclassical growth model developed by Aruoba, Waller, and Wright [<italic>Journal of Monetary Economics</italic> (2011)] to study the properties of the model when there is exogenous growth. I first consider the planner's problem, and then the equilibrium outcome in a monetary economy. I do so by first using proportional bargaining to determine the terms of trade and then considering competitive price taking. I obtain closed-form solutions for all variables along the balanced growth path in all cases. I then derive closed-form solutions for the transition paths under the assumption of full depreciation and, in the monetary economy, a particular nonstationary interest rate policy. The key result is that inflation is damaging to per capita income levels along the balanced growth path and to short-run growth of the economy.
Year of publication: |
2011
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Authors: | Waller, Christopher J. |
Published in: |
Macroeconomic Dynamics. - Cambridge University Press. - Vol. 15.2011, S2, p. 293-312
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Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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