The non-neutrality of money and the optimal monetary growth rule when preferences are recursive: cash-in-advance vs. money in the utility function

Article Abstract:

Two macroeconomic models on monetary growth, both assuming agents who have infinite lives and recursive time preferences, are compared. The first model regards money as part of the utility function while the second considers money with a cash-in-advance restraint. The first model results in higher steady-state capital intensity and lower social welfare in the face of an increase in the monetary growth rate. The latter model brings about decreased capital intensity and lower social welfare. An optimal monetary growth rate is devised for both models, the steady-state time preference rate being maximized.

Utility theory, Utility functions

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Monetary neutrality in a dynamic macroeconomic model under alternative monetary regimes

Article Abstract:

The neutrality of money under alternative stochastic monetary regimes is examined using a simple growth model. In a given stochastic money supply, the neutrality of money as set by William A. Brock is indicated to be determined by the quality of information available to agents. In the Stephen LeRoy model, money is neutral as in William Brock's model in cases where money growth rates are serially independent and non-neutral otherwise. When the money supply is allowed to decrease in an alternative monetary regime, information is unnecessary because money is always non-neutral.

Interest rates, Capital investments, Capital movements, Budget deficits

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The monetary approach to the exchange rate: long-run relationships, identification and temporal stability

Article Abstract:

Findings from an evaluation of the exchange rate determination monetary model from a long-run perspective rejects the forward looking model of the monetary model. Evaluation against 3 US dollar bilateral exchange rate data shows that the unrestricted monetary model is a valid framework explaining the exchange rates' long-run movements with further tests showing that the cointegration rank dimension may be sample dependent.

Econometrics & Model Building, Econometrics, Foreign exchange, Money demand, Business models

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