financial development income inequality and the redistributive effects of monetary policy abstract how should financial systems be designed to limit income inequality does the redistributive impact of inflation depend on the extent of financial development should optimal monetary policy vary across countries with different levels of financial development in order to address these questions we develop a monetary growth production model with heterogeneous agents in our economy optimal policy needs to weigh the effects of policy across two groups capital owners and individuals who hold liquid assets in this environment we compare various economies that are identical in every aspect except for their level of financial development interestingly we generally find that economies at the highest stages of financial development economies in which money bonds and claims to capital are traded experience the highest amount of capital formation and social welfare as long as inflation is low yet regardless of the extent of financial development there are generally redistributive consequences from inflation moreover the model tends to predict that economies with relatively small stock markets produce the highest levels of income inequality empirical work examining the role of money growth and the implications of financial development across countries is consistent with predictions from the model

the impact of the new economic model on latin america s agriculture abstract this paper examines the changes in policy instruments and public institutions under the new economic model nem that have affected latin american agriculture with particular attention to brazil mexico and chile in general production has increased while acreage and rural employment have declined in many countries in the context of a shift from traditional to nontraditional products there has been a sharp reduction in the number of small farmers often accompanied by a greater inequality while the rural sector needs efficient public institutions the retreat of the state has left important gaps not yet filled by the private sector with negative consequences in particular for small producers

when is stabilization expansionary evidence from high inflation countries which stabilize from high inflation here defined as an annual rate above 40 usually have output expansions in the first and subsequent years of stabilization these expansions occur in both exchange rate based and money based stabilizations the paper reaches these conclusions after examining a sample of all 28 episodes in the international data that meet a pre defined criterion for stabilization from high inflation the results do not change with alternative growth and stabilization definitions the paper documents similar expansionary stabilizations in historical data and in the recent experience of the former communist economies expansionary stabilizations may be an indirect confirmation of recent theories of political economy that predict that stabilization will not occur until the gains are very large william easterly

a growth model of inflation tax evasion and financial repression abstract this paper studies the relation between policies of financial repression inflation rates and long term growth we set up a model which shows that governments might want to express the financial sector because this sector is an easy source of resources for the public budget the inflation tax to the extent that the financial sector increases the efficiency of the allocation of savings to productive investment the choice of the degree of financial development will have real effects on the growth rate of the economy in countries where tax evasion is large the government will optimally choose to repress the financial sector in order to increase seigniorage taxation this policy will then reduce the efficiency of the financial sector increase the costs of intermediation reduce the amount of investment and reduce the growth rate of the economy financial repression will therefore be associated with high tax evasion low growth and high inflation

stylized facts and stylized illusions inflation and productivity revisited recent estimates of a negative empirical relationship between inflation and the rate of growth of productivity provide a strong case for vigorous anti inflationary policy this paper tests the robustness of this evidence using long quarterly and annual datasets for four countries canada united states united kingdom west germany our results from cointegration and other time series tests show no evidence for any connection between inflation and the level of productivity we do find a strong connection between inflation and productivity growth but it is so internally inconsistent as to be incredible the best explanation is that it is accounted for entirely by statistical bias from attempting to cointegrate stationary and non stationary variables

the demand for money in developing countries assessing the role of financial innovation traditional specifications of money demand have commonly been plagued by persistent overprediction implausible parameter estimates and highly autocorrelated errors the authors argue that some of these problems stem from the failure to account for the impact of financial innovation they estimate money demand for ten developing countries using various proxies for financial innovations they also assess the relative importance of this variable finding financial innovation can be better modeled as a stochastic random walk trend rather than a deterministic time trend financial innovation plays an important role in determining fluctuations of the demand for money the importance of this role increases with the rate of inflation

inflation and growth impatience and a qualitative equivalence this paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money in utility function miuf and transactions costs tc models we establish a qualitative equivalence between the two models in a setup without a labor leisure tradeoff when the time preference is decreasing or increasing in consumption and real balances both the miuf and tc models are qualitatively equivalent in terms of predicting a negative or positive relationship between inflation and growth in a steady state both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature while a decreasing time preference in real balances corroborates with empirical evidence there is no evidence in support of an increasing time preference in real balances

the pre and postwar price output paradox revisited this article addresses past findings of a change in the sign of the price output correlation in the preand post world war ii eras this paradox can be resolved by taking into account the changing direction of price movements deflation to inflation during the two time periods there is in fact a consistently negative correlation between the absolute value of price level changes and changes in output in both time periods and throughout the entire sample this finding offers empirical support to economic theories espousing the benefits of price stability

real money balances as a productive input abstract using a translog production function and data from the united states private sector over the period 1929 1972 this paper clarifies the theoretical debate which has occured on whether real money balances are an original factor input or a catalyst with a role similar to technological innovation real money balances are found to be an important factor input that cannot be treated as separable from the primary factor inputs capital and labor furthermore the results indicate that real money balances are substitutes for capital but complements with labor while capital and labor are in a relative sense complements

monetary policy banking and growth i introduction fischer and modigliani 1978 exhaustively list the costs associated with inflation in recent years a growing body of evidence is consistent with the notion that slower output growth may be added to the fischer modigliani list specifically analyses by kormendi and meguire 1985 fisher 1991 degregario 1992 gomme 1993 wynne 1993 barro 1996 and others find a negative correlation between the inflation rate and output growth both across countries and over time 1 moreover the studies consistently find that the growth rate response to a change in the inflation rate is quite large the different studies produce a range of correlation coefficients a country in which the inflation rate is 10 will grow between 1 4 and 3 4 percentage points slower than a country in which the inflation rate is 0 the purpose of this paper is to determine whether a reasonably calibrated model economy can account for the size of the regression coefficients the model economy is a modified version of a member of the ak class in which bank deposits are used to finance capital accumulation in this model economy fiat money is valued because the bank is required to hold reserves against its deposits throughout this paper bank deposits is used in a narrow sense to include only those deposits against which a reserve requirement applies because monetary policy has two tools at its disposal it is possible to conduct two separate policy experiments the results from these experiments particularly the inflation rate experiment sheds light on the potential importance on the share of investment financed through bank deposits researchers have long been interested in the interaction between financing and growth schumpeter 1911 argued that the financial sector more specifically its stage of development affected a country s growth rate 2 cameron 1967 described financial development in scotland england and france in the late 18th and early 19th centuries cameron concluded that scotland and england entered the industrial revolution ahead of france because it had the financial infrastructure capable of financing capital accumulation on the needed scale king and levine 1993 find that countries with more developed financial sectors tend to grow faster than countries with less developed financial sectors it seems natural therefore to investigate whether the means of financing can yield any insights into the inflation growth relationship other researchers have also quantified the effect that movements in the inflation rate has on the growth rate in particular jones and manuelli 1995 use several variants of economies in which people hold fiat money to satisfy a cash in advance constraint they demonstrate that large growth rate effects cannot be accounted for in these model economies in these models inflation does not materially alter capital accumulation rates affecting instead the allocation between the credit good and cash good purchases jones and manuelli find small growth rate effects in an economy in which the tax code has nominally denominated depreciation rates in two papers that focus on inflation and growth chari jones and manuelli 1995 1996 consider economies in which capital accumulation can be financed through either bank deposits or directly as in the economy specified in this paper reserve requirements are applied against bank deposits agents can avoid the inflation tax by using the direct financing means more intensively consequently the growth rate effects are muted in the chari jones manuelli model economies and are too small to account for the size of the regression coefficients reported in kormendi and mcguire fischer and barro in this paper i assume that all investment is financed through bank deposits with this extreme assumption the model economy can account for the size of the growth rate effects observed in the data 3 thus there is a potentially useful lesson learned from the quantitative results in the all bank financing economy and those reported in chari jones manuelli

the optimal inflation tax when money reduces transactions costs abstract it has been argued that if money acts as an intermediate good the optimal inflation tax is zero this paper reexamines such a claim in the context of a model in which money reduces transactions costs it is shown that modeling money as an intermediate good does not necessarily imply that the optimal inflation tax is zero the optimality of a zero inflation tax depends on the properties of the transactions costs technology in particular if the transactions costs technology does not exhibit constant returns to scale it is optimal to resort to the inflation tax

inflation and the misallocation of resources gil mehrez this paper analyzes the effects of inflation on the resource allocation between the financial sector and the manufacturing sector we develop a model with heterogeneous workers who can be employed either in the manufacturing sector which produces a consumption good or the financial sector which provides liquidity services a rise in inflation reduces the demand for labor in the manufacturing sector and increases the demand for financial services this induces a shift of resources from the manufacturing sector to the financial sector and reduces consumption opportunities an empirical investigation using 55 countries strongly supports the result that higher inflation increases the relative size of the financial sector jel e i introduction in the analysis of the real effects of inflation it is widely accepted that the effects depend on the source of inflation on whether the inflation is anticipated or unanticipated and on whether the institutional structures associated with a rigid tax system or inadequate financial markets have been adjusted to neutralize the consequences of inflation although the effects of unanticipated inflation are fairly well known the effects of anticipated inflation under adequate tax systems and financial markets are not yet fully developed this is surprising given the dislike of the public policy makers and economists toward inflation there are three channels through which inflation may affect welfare first inflation causes consumers to shift the timing of their shopping closer to the receipt of income and creates incentives for shop owners to decrease their inventories the shoe leather effect bailey 1956 second inflation acts as a tax on consumption cooley and hansen 1989 1991 and investment degregorio 1992 due to a cash in advance constraint hence higher inflation decreases employment consumption and investment third inflation increases the use of costly credit karni 1974 gillman 1993 english 1996 and aiyagari et al 1999 this article focuses on the effects of inflation on the allocation of resources between the manufacturing sector and the financial sector of an economy higher inflation shifts resources from the manufacturing sector to the financial sector as agents decrease their money holdings in favor of transaction services monetary substitution such as credit cards interest bearing checking accounts foreign currency accounts or other very short term interest bearing assets that need to be managed on a regular basis the resulting effect on the size of the financial sector has been documented since the 1920s for example bresciani turroni 1937 reported that the number of bank employees in germany increased during the hyperinflation period of 1920 1923 from 30 000 to 60 000 and then declined by nearly one half after the fall in inflation in 1924 more recent episodes of high inflation provide further evidence for example the share of the banking sector in gdp in israel nearly doubled in the early 1980s a perio d of high inflation and declined substantially following the stabilization of 1985 marom 1982 kleiman 1989 we develop a two sector model with heterogeneous workers in which the allocation of resources is determined endogenously and depends on the inflation rate among other factors higher inflation increases the relative size of the financial sector as firms find it optimal to devote more resources to monetary substitution and manage their transactions more efficiently in addition to the decrease in output due to the shift of resources higher inflation also increases wages in the financial sector relative to wages in the manufacturing sector english 1996 and aiyagari et al 1998 propose a similar argument our approach differs from these articles in several ways first we investigate the effect of inflation on relative wages and on the allocation of skills across the two sectors in general

financial intermediation and regime switching in business cycles the authors study a one sector growth model where capital investment is credit financed and there is an adverse selection problem in credit markets the presence of adverse selection creates an indeterminacy of equilibrium many equilibria display permanent fluctuations characterized by transitions between walrasian regimes and regimes of credit rationing cyclical contractions involve declines in real interest rates increases in credit rationing and withdrawals of savings from banks for some configurations of parameters all equilibria display cyclical fluctuations the authors provide sufficient conditions for deterministic cycles consisting of m periods of expansion followed by n periods of contraction to exist copyright 1998 by american economic association

cross country evidence on long run growth and inflation i introduction many believe inflation has important adverse effects on long run economic performance this conviction is based on the logic summarized by fischer and modigliani 1978 for example that firms and workers devote productive resources to dealing with inflation that inflation uncertainty reduces efficiency by discouraging long term contracting and increasing relative price variability and so on nonetheless many others believe that the magnitudes of such costs are small and insignificant at moderate rates of inflation cross country growth regressions would seem to offer a sensible means of empirically determining inflation s effects 1 such analysis would appear less sensible however in light of the levine and renelt 1992 finding that estimates of the growth inflation relationship vary sharply with the regression specification nonetheless analyses completed subsequent to levine and renelt 1992 for example fischer 1991 1993 cozier and selody 1992 and cukierman et al 1993 continue to use growth regressions to infer inflation s effects and typically conclude growth and inflation to be inversely related this paper shows that while inflation does generally appear to be inversely related to growth estimates of the relationship suffer two additional robustness problems problems which emerge across a variety of model specifications more specifically this analysis first demonstrates the sensitivity of growth inflation results to modifications to the sample of countries limited from the start to low and moderate inflation countries it next demonstrates the sensitivity of results to modifications in the time period for example among oecd countries abbreviating the covered time period from 1960 85 to 1968 85 reduces inflation s effect on growth to insignificance such fragility with respect to the country sample and time period may be viewed as even more fundamental than the regression specification sensitivity documented by levine and renelt 1992 this analysis then shows that the same robustness problems plague alternative specifications of the growth inflation relationship the baseline regression estimated here supposes a linear growth inflation relationship formally it follows from an augmented solow growth model 1956 in which inflation drives the level but not the growth rate of steady state income plausible alternatives include allowing inflation to have non linear effects on growth as in log and quadratic specifications and respecifying the model such that inflation formally drives steady state growth rather than just the steady state level of income such alternatives to the baseline specification yield results which suffer the same basic difficulties of sensitivity to country sample and time period ultimately these findings should further discourage that is lay to rest the practice of quantifying inflation s effects with cross country growth regressions while cross country growth regressions may be viewed as generally suggesting that inflation imposes costs the fragility of the estimates indicates researchers will need to use alternative approaches to better identify inflation s costs researchers might for example find it productive to build on the investment analyses of huizinga 1993 and pindyck and solimano 1993 which combine time series and cross section variation ii theory as detailed by mankiw romer and weil 1992 the solow growth model 1956 augmented to allow for human capital may be used to derive a simple relationship between growth and initial income population growth and the rates of physical and human capital investment 1 ln y sub i t y sub i 0 gamma sub 0 gamma sub 1 ln y sub i 0 gamma sub 2 ln n sub i g delta gamma sub 3 ln s sub i gamma sub 4 ln h sub i v sub i the variable y denotes income per capita n represents exogenous population growth g denotes the exogenous rate of growth of labor augmenting technology delta is the common rate of depreciation of physical and human capital and s and h denote respectively the rates of physical and human capital accumulation

the effect of inflation on the natural rate of output experimental evidence we examine the inflation output relationship in the usa for the period 1955 90 we start by replicating smyth 1992 and subjecting his estimates to a series of diagnostic tests the model is shown to satisfy conditions for valid inference weak exogeneity and policy analysis super exogeneity engle hendry and richard 1983 these robustness checks allow us to study the out of sample consequences of the point estimates for various levels of inflation one central experimental result is that for inflation rates exceeding 4 the natural rate of output is reduced to such an extent that it contributes to a reduction in the growth rate of real gnp that is below historical trend 3 1 in our sample

latin america s new economic model micro responses and economic restructuring abstract this paper introduces a special issue on the microeconomics of latin america under the new economic model nem the paper reviews the rationale and policies of the nem and analyzes the impact of the reforms at the macroeconomic sectoral and microeconomic levels at the firm level the contributions to this issue demonstrate that a considerable adjustment process is taking place as sectoral structural change indices demonstrate however this has not resulted in widespread shifts of resources between sectors nor has it resulted in significant improvement in overall employment productivity and growth the authors analyze the reasons for this disjuncture and suggest policy alternatives

the effects of inflation on economic growth lessons from latin america this paper investigates the relationship between inflation and long run growth it presents an endogenous growth model that illustrates the channels through which inflation affects growth the model highlights the effects of inflation on the productivity of capital and the rate of capital accumulation the reduction in growth is caused by a diversion of resources away from activities that lead to faster rates of growth toward activities associated with reducing the costs of inflation the negative association between inflation and growth is assessed empirically for a sample group of latin american countries this abstract was borrowed from another version of this item

cross country evidence on the link between inflation volatility and growth it is generally accepted that short run monetary mis management as reflected in inflation volatility affects the long run growth rate of the economy this proposition is tested for a cross section sample of 78 countries over the period 1965 85 the evidence suggests that after controlling for other country specific growth correlates high inflation volatility is associated with lower mean growth inflation volatility was also found to have a negative effect on the productivity of investment but does not appear to affect the share of investment of gdp these results are also robust to an alternative data set that extends the sample period to 1994

economic growth financial evolution and the long run behavior of velocity a general equilibrium model is presented in which buyers and sellers find it increasingly difficult to make private credit arrangements as economic activity spreads into new markets hence the demand for money increases as the structure of production and trade becomes more complex at the same time however financial innovations allow agents to economize on their cash balances together these effects of technological progress account for two empirical regularities the u shaped pattern in velocity and the ever increasing share of productive resources devoted to the private financial sector that are associated with the process of real economic growth

agricultural policy market barriers and deforestation the case of mexico s southern yucatan summary this paper examines the linkages between agricultural policies and deforestation in a development frontier of southern mexico focusing on support programs targeted at buffering farmers from structural reforms we argue that local barriers to market participation condition the responsiveness of farmers to program incentives thereby constituting a key channel through which agricultural policies impact the environment an econometric model parameterizes the influence of two programs procampo and alianza para el campo on cultivation consistent with an economic environment characterized by market barriers results suggest that program support even when decoupled from production decisions significantly determines land use and deforestation

dynamics in a transactions based monetary growth model abstract this paper characterizes the dynamics of a monetary endogenous growth model in which money is introduced into the system via a transactions cost technology a monetary equilibrium that either satisfies the friedman rule of the optimum quantity of money or accommodates the zero inflation rate policy is dynamically unstable with cagan like hyperinflation the monetary equilibrium may either be unstable or exhibit dynamic indeterminacy in which a variety of equilibrium outcomes emerge in transition the rate of monetary expansion the relative magnitudes of the intertemporal elasticity of substitution and the production technological parameter are crucial for determining the stability property of the model

modelling real exchange rate effects on output performance in latin america this article empirically analyses real per capita gdp growth for six latin american countries argentina brazil chile columbia mexico venezuela in terms of real exchange rate depreciations inflation and us interest rates focussing on the role of the real exchange rate we find evidence of nonlinearity in this relationship which we capture through a smooth transition regression model with the exception of mexico nonlinearity in economic growth is associated with changes in the real exchange rate with depreciations leading to different relationships compared with appreciations regimes for mexico are associated with the past growth rates with effectively symmetric effects of real exchange rate changes although our results are in accord with other recent literature in that depreciations may have negative effects for growth the asymmetries we uncover indicate that these effects depend on the conditioning state

the value of time and the transactions demand for money this paper reexamines the hypothesis of dean s dutton and william p gramm and edi karni that the wage rate influences the demand for money as a proxy for the value of transactions time it develops value of time transactions models which yield demand for money equations that have a real wage rate argument and compares it to a non value of time alternative that does not the author finds that the value of time models perform well and that the value of time effect is empirically significant copyright 1990 by ohio state university press

the economics of price scissors reply the question of how the funds required for the capital accumulation associated with industrialization are to be raised has a long history since the industrial sector is relatively small in the early stages of industrialization there has been a presumption that funds must primarily come fromi the agricultural sector the issue has been how best to extract these funds what are the effects of such a resource transfer what is the nature of the limits on the amounts to be extracted and whether in this process it is desirable or necessary to squeeze simultaneously the urban proletariat in our 1984 paper we presented a simple model of a closed socialist economy in which the instruments at the disposal of the government are the terms of trade the relative price of the agricultural good in terms of the industrial good and the industrial wage which we believe sheds some light on these questions particularly in the context of the soviet industrialization debate this model is part of a larger research program in which we have examined similar questions in the context of economnies under a variety of trade regimes with a variety of institutional structures with and without heterogeneity among individuals within a sector with and without the disaggregation of commodities produced in each of the two sectors with and without migration where the government has at its disposal other policy instruments where wages in the urban sector are determined in a variety of ways and in which wages and prices may affect the productivity of workers the reason for examining a variety of economic structures is obvious as the past experience of economic development has shown there is an enormous diversity in the salient features of developing countries and in the set of policy instruments that a government can or cannot employ among our objectives have been i to examine a range of models emphasizing diflerent sets of structural features in part to ascertain which features are central to answering the questions at hand and ii to develop general reduced form relationships to describe specific parts of the economy for instance to represent the migration mechanism and the urban wage determination and to show that the central results depend only on the properties of these reduced form relationships the issues raised by ake blomqvist and michael carter in their comments 1986 are primarily interpretative they contend that our simple model of a socialist economy is not an appropriate vehicle for examining certain propositions which the soviet economist evgeny preobrazhensky advanced during the soviet debate instead carter argues for an open economy specification and for a particular type of wage productivity effect blomqvist on the other hand favors a specification in which the government can set different prices in two sectors we have referred to the problem of analyzing differential prices or taxes in the two sectors as that of urban rural pricing in contrast to the price scissors problem where both sectors face the same prices as the commentators are aware we have analyzed these and more general specifications in our 1985a and 1983 papers respectively since it is not possible to present a full analysis within this short reply we briefly describe some of the qualitative features of price scissors within a simple framework so that one can see certain implications of alternative assumptions we then turn to the more doctrinal and yale university new haven ct 06520 and princeton university princeton nj 08544 respectively see our studies 1983 1984 1985a b c 1986 an empirical framework for analyzing urban rural pricing issues in a multiperson multicommodity context was developed in sah 1982 related models have been employed by avishay braverman et al 1984 and others

the inflation tax in a convex model of equilibrium growth a general equilibrium monetary economy is described that exhibits equilibrium growth the production technology is consistent with jones and manuelli 1990 and rebelo 1991 the inflation tax and nominal interest rates are shown to be inversely related to the equilibrium growth rates of real variables until a critical point is reached at this point equilibrium growth is eliminated and the predictions of stockman 1981 and abel 1985 concerning the level effects of distortionary monetary policies appear for the nominal side of the model a version of the prediction of friedman 1969 is shown to hold for a particular balanced growth path following king and rebelo 1990 a linear growth version of the model is calibrated to illustrate the potentially large growth and welfare effects of moderate inflations

how much bang for the buck mexico and dollarization two arguments advanced in favor of mexico abandoning the peso and adopting the u s dollar are to lower exchange rate volatility and inflation we are not able to identify an independent link between economic growth and either the exogenous component of exchange rate volatility or the exogenous component of inflation exchange rate volatility generally reflects other factors rather than representing an independent growth determinant the findings are consistent with theoretical predictions that inflation influences growth by affecting financial development however we present suggestive evidence that legal reforms offer greater financial development dividends for mexico than adopting the dollar two of the main arguments advanced in favor of mexico abandoning the peso and adopting the u s dollar are 1 to lower inflation and inflation uncertainty and 2 to reduce exchange rate volatility from 1960 tol995 mexico s annual inflation rate averaged about 24 5 percent while inflation in the united states averaged 5 5 percent in addition mexico has experienced severe exchange rate fluctuations against the dollar especially in the last fifteen years supporters of complete dollarization believe that reducing the rate of inflation which moves very closely with the volatility of inflation toward u s levels and eliminating exchange rate variability vis a vis the u s dollar will enhance the business climate and thereby promote economic performance if lower inflation rates and less exchange rate variability boost growth then this strengthens the case for dollarization if however inflation and exchange rate variability do not exert large impacts on economic activity then the arguments in favor of dollarization must be sought elsewhere besides inflation and exchange rate volatility policymakers must contemplate an array of factors in deciding on dollarization dollarization would eliminate discretionary monetary policy and limit lender of last resort facilities during financial sec

real wages inflation and labour productivity in australia this paper presents an analysis of real wages inflation and labour productivity interrelationships using cointegration granger causality and most importantly structural change tests applications of tests to australian data over the 1965 2007 period corroborate the presence of a structural break in 1985 and show that a 1 percent increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0 5 and 0 8 percent comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance granger causality test results suggest that real wages and inflation both granger cause productivity in the long run

the economics of price scissors abstract in the context of a centrally planned developing economy evgeny preobrazhensky suggested the possibility of financing the accumulation process by turning the internal terms of trade against the peasantry without hurting the industrial proletariat which proposition has recently been questioned in a celebrated paper by sah and stiglitz 1984 in the present analysis we first show that consumer rationing is an essential component in preobrazhensky s analysis and that sah and stiglitz model since it relies on market equilibrium cannot be considered as a valid test of preobrazhensky s propositions the conditions under which preobrazhensky s thesis holds are then investigated together with an analysis of rural urban differential pricing policies

electricity consumption and economic growth in nigeria a revisit of the energy growth debate abstract this paper examines the dynamic causal linkages between electricity consumption and economic growth in nigeria within a trivariate vecm for the period 1971 2011 the paper obviates the variable omission bias and the use of cross sectional techniques that characterise most existing studies the results show that there is a distinct causal flow from electricity consumption to economic growth both in the short run and in the long run this finding supports the electricity led growth hypothesis that has been conjectured in the literature the paper urges policy makers in nigeria to implement policies which enhance the generation and consumption of electricity in order to engineer economic growth appropriate monetary policies must also be put in place in order to moderate inflation thus enhancing growth

monetary policy overlapping generations and patterns of growth this paper investigates the role of monetary policy in economic growth using an infinitely lived overlapping generations model with a simple convex technology that can yield endo genous growth we show that money supply behaviour of the government may have significant effects on the long run economic growth in addition to the effect on the long term growth rate of the economy the policy may determine whether the economy stays in the exogenous growth process restricted by the growth rate of labour supply or realizes the endogenous growth that sustains continuous growth of pep capita income and consumption effect of inflation on capital accumulation has been one of the central topics in macroeconomics using an ad hoc model tobin shows that a rise in the rate of inflation deepens capital formation whereas sidrauski presents an opti mizing model in which money is superneutral that is inflation has no effect on capital formation in the long run these studies have been extended by a number of studies such as dornbusch and frenkel 1973 and wang and yip 1992 however the concern of these studies is restricted to the analysis of the level effect of inflation on capital accumulation recent developments in endogenous growth theory present a useful analytical framework for re examin ing the effect of inflation on capital accumulation and economic growth in contrast to the strong emphasis on the importance of fiscal policy for long run economic growth seen in mino 1989 barro 1990 and king and rebelo 1990 the role of monetary policy has been mostly ignored in the endogenous growth literature recalling that the effect of money growth on capital formation has been the central issue in money and growth literature it is rather curious that recent studies on endogenous economic growth focus exclusively on the real side of the economy there is however a small number of authors investigating the role of money in endogenously growing economies marquis and reffet 1991 and mino 1991 introduce money into two sector models involving human capital accumulation via a cash in advance constraint they conclude that an increase in the rate of nominal money supply generally depresses the long term economic growth as long as the cash in advance con straint applies to investment demand for either physical or human capital wang and yip 1991 extend the uzawa lucas model of endogenous growth by assuming that households allocate their available time between production transaction and human capital formation the transaction time is assumed to be a decreasing function of real money balances and therefore a reduction in real balances arising from an increase in the monetary expansion rate increases c the london school of economics and political science 1995

the effect of inflation and real wages on productivity new evidence from a panel of g7 countries this article examines the effect of inflation and real wages on productivity within a panel unit root and panel cointegration framework for the g7 countries over the period 1960 to 2004 the main contribution of the article is to provide panel long run estimates of the effect of inflation and real wages on productivity in the g7 countries over this period the article finds that for the panel as a whole a 1 increase in real wages generates a 0 6 increase in productivity while the effects of inflation on productivity are statistically insignificant for most of the individual countries and for the panel as a whole

how much and how often a model of repeated consumption with endogenous consumption frequency abstract we study the consumption pattern for a repeated good in which individuals choose both consumption frequency and intensity in response to income price and setup cost results include that increased setup costs reduce frequency and increase intensity and that the effects of a setup cost increase are qualitatively different from those of a price increase or an income reduction

causality between inflation and real growth abstract the paper investigates inflation growth causality over 1947 2005 with varma ml asymmetric vgarch the results imply that one uncertainty affects positively its level and much less negatively the other level whereas one level influences positively both uncertainties friedman s hypothesis was not strongly rejected

money and the bias of technical progress in the literature on the behaviour of a monetary economy it has been suggested that in addition to its role as a medium of exchange the role of money in production should be recognized explicityliy however on this latter point there is some disagreement as to the mechanism by which it affects production for example mundell 1971 bailey and friedman 1969 attribute direct productivity to money and consequently sugest that is should be treated as a separate facto of production on the other hand brunner and meltzer 1971 perlman 1971 stein 1971 gabor and pearce 1958 saving 1972 and moroney 1970 emphasize the role of money as an innovational factor while the reasoning varies the basic idea is that the use of money enhances efficiencies of capital and labour in other words money acts as an input augmenting factor in a recent paper subrahmanyam and cosimano 1979 using data on the indian economy for 1950 51 1969 70 and the ces production function framework have tried to test t

a liquidity in advance model of the demand for money under price uncertainty abstract we develop a model of money demand in which the asset and goods markets open sequentially money balances are subject to price level and consumption risk empirical evidence from a bivariate arch framework suggests both sources of risk reduced money demand in the 1970s inflation risk depresses money demand throughout our sample 1962 1987 the econometric analysis resolves conflicting empirical estimates reported in the literature

sectoral balance in development a survey abstract this paper surveys the literature on sectoral balance to see how sectoral imbalances can retard economic development it examines definitions of sectors and balance provides background facts theories and planning tools reviews the debate on balanced growth and surveys two sector models of agriculture industry consumption investment and luxury basics interaction the open economy and the role of service nonmarket and unproductive sectors it argues that the examination of important development issues requires multisectoral analysis incorporating the insights of several of these models and that alternative models with different structural characteristics deserve attention

anticipation of future consumption a monetary perspective we adapt the monetary model sidrauski 1967 to study the hypothesis of anticipation of future consumption we assume that anticipation of future consumption affects an agent s instantaneous utility and that all effects of future consumption on current well being are captured by the stock of future consumption monetary policy effectiveness is thereby reduced and a zero nominal lower interest rate and thus the friedman rule is destabilizing given this we can derive a just stable equilibrium nominal interest rate with matching definitions for inflation and monetary growth we demonstrate that these implied lower bounds match their historical analogues well

inflation and growth pecuniary transactions costs and qualitative equivalence this paper develops a pecuniary transactions costs tc approach to reexamine the principal relationships and results concerning inflation and growth in a model with a general tc function and an endogenous labor leisure choice we consider four special cases by distinguishing among money as 1 a consumption good 2 a production good 3 an investment good and 4 a consumption good as well as an investment good under some weaker conditions as in related studies a reversed tobin effect obtains for all cases a high monetary growth rate leads to lower steady state capital labor consumption and real money balances these findings suggest that a pecuniary tc model is qualitatively equivalent to alternative models in the literature

bridging the gap between partial and total factor productivity measures using directional distance functions technical dependencies as well as data constraints limit our ability to allocate inputs across sectors and hence our ability to measure sectoral productivity we adapt a directional measure of efficiency to the measurement of sector specific productivity that does not require allocating all inputs across sectors applied to the agricultural sector of a group of countries the results show important differences in livestock and crops productivity growth commonly used partial factor productivity measures for livestock and crops tend to overestimate productivity growth in most developing countries while underestimating it in european countries

on the equivalence of private and public money abstract when does a swap between private and public money leave the equilibrium allocation and price system unchanged to answer this question the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles we derive sufficient conditions for equivalence and apply them in the context of the chicago plan cryptocurrencies the indian de monetization experiment and central bank digital currency cbdc our results imply that cbdc coupled with central bank pass through funding need not imply a credit crunch nor undermine financial stability

the role of rare earth prices for consumer prices an ignored factor abstractthe article explores the role of a new determinant that accounts for driving consumer prices i e rare earth prices rare earths are used for many advanced manufacturing and military technologies performing a number of panel methodological approaches panel cointegration findings support the initial insight of the authors and illustrate a positive effect on consumer prices across all rare earths