The Non-Superneutrality of Money and its Distributional Effects when Agents are Heterogeneous and Capital Markets are Imperfect

In this paper we develop an OLG model with heterogeneous agents, money and bequests, introducing occupational choice and financing constraints when capital markets are imperfect. We show how, under appropriate conditions, all the moments of the distribution are affected by changes in money growth. More precisely, if capital markets are imperfect and heterogeneous agents are liquidity constrained, investment in fixed capital is not efficient and aggregate wages and profits depend on the availability of loanable funds. An increase in money growth may imply a more efficient aggregate investment. Therefore aggregate product and wealth positively depend on an acceleration in money growth.