Education, Endogenous Human Capital, and Monetary Economic Growth with MIU Approach

This study builds a monetary growth model with inflation policy and education. The model is a synthesis of the Uzawa-Lucas two-sector growth model and traditional monetary model with the money-in-utility (MIU) approach. We show how money, physical capital and human capital interact over time under exogenous inflation policy in a free market economy. The dynamics of the economy is described by three differential equations. We show that the monetary economic system has a saddle equilibrium point. We simulate motion of the economic system and carry out comparative statics analysis with regards to the monetary policy, propensities to save wealth and to receive education.