A note on the optimum quantity of money

Chuang, Shi-Feng; Huo, Teh-Ming

doi:10.1016/s0165-1765(02)00319-1

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2004

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“…10. In Chuang and Huo (2003), it is shown that when one takes into account the welfare loss on the dynamic adjustment path, higher inflation reduces overall economic welfare with certainty. A similar result is applicable here; that is, when µ = −ρ, money grows exactly according to Friedman's OQM.…”

Section: Notesmentioning

confidence: 99%

Steady-State Real Effects of Inflation in a Heckscher–ohlin Cash-in-Advance Model

Chuang

2004

Macroecon. Dynam.

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This paper explores the possible real effects of inflation within a two-sector neoclassical growth model of the Heckscher–Ohlin type with a cash-in-advance constraint on the purchases of consumption goods. The main findings are that the relative prices of both factors and of both goods, which are linked via a Stolper–Samuelson relation, depend only on the rate of time preference, not on any monetary variable; that the steady-state level of total capital can be influenced by inflation if the capital intensities and the cash requirements in both sectors differ, leading to Tobin effects or reversed Tobin effects; and that higher inflation unambiguously reduces total labor supply and leads to a reversed Tobin effect in most cases if the labor/leisure choice is endogenized.

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Section: Notesmentioning

confidence: 99%