S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics Seoul Journal of Economics vol.09(2) (Summer 1996)
Money, Inflation and Growth
- Blackburn, Keith; Hung, Victor T.Y.
- Issue Date
- Seoul Journal of Economics, Vol.9 No.2, pp. 145-162
- Money is introduced into an endogenous growth model in which exchange requires cash-in-advance. We show that the decentralized competitive outcome is an inefficient balanced growth equilibrium in which money affects growth through two independent channels: externality in production and private transactions cost in exchange. We compute the growth (and welfare) maximizing monetary policy which trades off these two effects. We also show that, in the absence of the externality, efficiency is restorable by means of a well-known optimum money supply rule.