Search, inflation and capital accumulation

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45 Scopus citations

Abstract

This paper constructs a model to integrate the search monetary theory into a neoclassical growth model. With divisible goods and money, the model is used to examine the relationship between money growth and capital accumulation. The framework uncovers a distinct extensive effect that an increase in the money growth rate increases the frequency of successful trades by increasing the number of agents in the market. This positive extensive effect on the number of trades can dominate the conventional negative intensive effects of money growth on individuals' labor input and real money balance, in which case increasing the money growth rate increases aggregate capital and output.

Original languageEnglish (US)
Pages (from-to)81-103
Number of pages23
JournalJournal of Monetary Economics
Volume44
Issue number1
DOIs
StatePublished - Aug 1999

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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