This paper studies the effects of monetary policies on employment, capital accumulation, consumption, and the term structure of interestrates in a cash-in-advance economy, where money is required for consumption expenditures. Monetary policy involves targeting the inflation rate or the nominal...

It is shown that, in contrast to models with fixed labour, a change in monetary policy involving an increase in the inflation rate would have the same qualitative effects on steady state capital, consumption, and employment, regardless of whether only consumption or both consumption and...