Cash-in-advance constraint with status in a neoclassical growth model

Kaminoyama, Ken-ichi and Kawagishi, Taketo (2012): Cash-in-advance constraint with status in a neoclassical growth model.

Abstract

In this paper, we assume that a cash-in-advance (CIA) constraint itself depends on relative income, which implies status. This constraint means that agents with higher income are more creditworthy and can make purchases with fewer money holdings. Under this assumption, we construct a one-sector neoclassical growth model and show that there exists a unique steady state that has saddle-path stability without specifying each function. Furthermore, we examine the effects of money growth on capital accumulation. If the status elasticity of CIA constraint is large, the Tobin effect can arise. In contrast, if it is small, the anti-Tobin effect can arise.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cash-in-advance constraint; Status; Money growth; Neoclassical growth model; Tobin/anti-Tobin effect
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O42 - Monetary Growth Models; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money

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