Document Type

Article

Publication Date

2003

Abstract

This paper examines the monetary growth implications of combining Stockman's cash-in-advance constraint on consumption and capital goods and an endogenous rate of time preference that is an increasing function of real wealth. The cash-in-advance constraint imposes an investment tax that reduces steady state consumption and capital. However, endogenous time preference wealth effects link the real and monetary sectors to yield a Mundell-Tobin effect. Cash-in-advance constraint effects dominate endogenous time preference wealth effects so that monetary growth reduces steady state capital and consumption.

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Also available for download here: http://ideas.repec.org/a/ebl/ecbull/v5y2003i2p1-7.html


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