Effects of monetary policy in a model with cash-in-advance constraints on R&D and capital accumulation

Daiki Maeda, Yuki Saito

To examine the effect of monetary policy on economic growth, we formulate an endogenous growth model with cash-in-advance constraints on R&D and capital accumulation as endogenous growth engines. Within this framework, we show that the relationship between economic growth and the nominal interest rate can be an inverted-U shape. Moreover, we demonstrate that the welfare-maximizing level of the nominal interest rate is larger than the growth rate-maximizing level of the nominal interest rate.

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Year of publication:	February 2020
Authors:	Maeda, Daiki ; Saito, Yuki
Publisher:	Osaka, Japan : The Institute of Social and Economic Research, Osaka University
Subject:	Capital accumulation \| CIA constraint \| Endogenous growth \| Monetary policy \| R&D \| Geldpolitik \| Investition \| Investment \| Endogenes Wachstumsmodell \| Endogenous growth model \| Cash-in-Advance-Restriktion \| Cash-in-advance constraint \| Monetäre Wachstumstheorie \| Monetary growth model \| Wachstumstheorie \| Growth theory