Inflation, factor substitution and growth
- Recent empirical studies on the inflation-growth-relationship underline that inflation has negative growth effects already under relatively modest rates. Most contributions to monetary growth theory, however, have difficulties in explaining such a pattern. It is shown in this paper that this problem can be overcome by establishing a link between monetary instability and the aggregate elasticity of factor substitution. Several microeconomic justifications can be found for a negative influence of inflation on factor substitution. It turns out that already in a simple neoclassical monetary growth model this effect is usually strong enough to question the superneutrality benchmark result in the steady state and to dominate all potential positive effects of inflation along the convergence path. In a more general perspective the paper contributes to a better integration of institutional change in aggregate models of economic growth.
| Author: | Rainer KlumpORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-333231 |
| URL: | http://ssrn.com/abstract=487420 |
| ISSN: | 1725-2806 |
| Parent Title (German): | European Central Bank: Working paper series ; No. 280 |
| Series (Serial Number): | European Central Bank: Working paper series (280) |
| Publisher: | Europ. Central Bank |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2003 |
| Year of first Publication: | 2003 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2014/03/20 |
| Tag: | CES production functions; Monetary growth models; convergence; inflation; neo-classical growth |
| GND Keyword: | Monetäre Wachstumstheorie; Inflation; CES-Funktion; Neoklassische Theorie; Aufholprozess; Nachholende Entwicklung |
| Page Number: | 45 S. |
| Note: | © European Central Bank, 2003. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. The views expressed in this paper do not necessarily reflect those of the European Central Bank. |
| HeBIS-PPN: | 347238157 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
