By Leopold von Thadden
This ebook is a marginally revised model of my doctoral thesis which I wrote in the course of my time as an assistant on the college of Economics of the collage of Magdeburg. i'm thankful that I had the chance to jot down my the sis within the stimulating surroundings of this younger and energetic school. lowe a large amount of gratitude to my manager Prof. G. Schwodiauer who con stantly inspired my paintings and helped to enhance it in lots of discussions. I additionally want to thank Prof. K-H. Paque and Prof. P. Flaschel who, as participants of my doctoral committee, commented on quite a few information of this learn in a truly optimistic demeanour. At a number of levels of my paintings I got beneficial reviews from many colleagues of mine, specifically T. Konig and A. Wohrmann. despite the fact that, it is going with out announcing that I keep complete responsi bility for all last blunders. Contents advent 1 I cash, inflation, and capital formation in the end: normal comments five 1 precis of the literature: theoretical points 7 2 precis of the literature: empirical facets 19 three extra reflections on funds 29 II cash, inflation, and capital formation: the point of view of overlapping generations versions forty three four The Diamond version with cash as unmarried outdoors asset forty five four. 1 The version. . . . . . . . forty six four. 2 Equilibrium stipulations. fifty one four. three coverage results fifty eight four. four dialogue. sixty one four. five Appendix . sixty three five version 1: Imperfect credits markets and uneven info sixty five five. 1 The version. . . . . . . .
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Additional info for Money, Inflation, and Capital Formation: An Analysis of the Long Run from the Perspective of Overlapping Generations Models
E. money acts purely as a store of value. Restating a well-known result of the literature, we show that under conditions which ensure the existence of a unique monetary steady state the Tobin effect 41 prevails in an uncontested manner. Also, we show that the dynamics around the monetary steady state are uniquely determined. Chapters 5-9 propose variations on the base model as discussed in chapter 4, and in all cases we introduce modifications which give money a more interesting role to play. In particular, chapter 5 discusses a version of the base model due to AzariadisjSmith (1996) in which imperfections in the credit market ensure, well in accordance with the 'complementarity hypothesis', that money and capital cease to be close substitutes.
Reflecting upon this unsatisfactory situation, Hahn (1969) arrives in his early work on 'money and growth' at the conclusion: "Economic theory still lacks a 'monetary Debreu'. The study of some simple problems raised by considering the growth of a monetary economy which follows must therefore be regarded as tentative. At some future date the issues here raised may be found to be peripheral to a proper understanding of money... To say that money is 'neutral' if the steady state values of the 'real' variables are what they would have been had we never introduced a monetary asset is, therefore, misleading.
R:f - At = 0 Vt . 8) [Vt· 14 m - At] . 9) Rearranging terms, one obtains: Ul (er , ct+l) U2(ef,et+ 1 ) [R:f - 14m] . e. to the real interest factor. 11) restates that a positive demand for real balances requires that money is not return-dominated by deposits. Evidently, in such a situation the portfolio composition with respect to deposits and real balances will be indeterminate from the consumer's perspective. 2 Equilibrium conditions In a competitive equilibrium, all agents take prices as given and choose actions which are both individually optimal and mutually consistent.