Interpreting Monetary Stabilization in a Growth Model With Credit Goods Production

Público
Creator Series Issue number
  • 525
Date Created
  • 1995-06
Abstract
  • This paper is motivated by observations concerning the size of the banking sector and the growth rate of the economy before and after successful stabilizations of high inflations. The facts suggest that the relative size of the banking sector increases during a period of accelerating inflation and decreases immediately following a successful monetary stabilization. Furthermore, the GDP growth rate is lower during the high inflation period than after stabilization. The goal of this paper is to develop a monetary growth model which is qualitatively consistent with these observations. The model we use is a variant of the Lucas and Stokey (1987) model of cash and credit goods. The main innovation in our model is that while cash goods and credit goods are perfect substitutes in consumption we posit different technologies for their production. We show that the model’s predictions on the impact of a permanent stabilization are consistent with the main real and monetary observations on high inflation countries.

Related information
Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
Publisher
  • Federal Reserve Bank of Minneapolis
Resource type DOI
License

Relações

Em Collection:
Última modificação

Conteúdo disponível para baixar

Baixar PDF

Zipped Files

Download a zip file that contains all the files in this work.

Itens