English, Article, Journal or magazine article edition: Money, banking, and capital formation Stacey L. Schreft; Bruce D. Smith

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Bookmark: http://trove.nla.gov.au/version/74511
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Money, banking, and capital formation
Author
  • Stacey L. Schreft
  • Bruce D. Smith
Physical Description
  • preprint
Notes
  • We consider a monetary growth model in which banks arise to provide liquidity. In addition, there is a government that issues not only money, but interest-bearing bonds; these bonds compete with capital in private portfolios. When the government fixes a constant growth rate for the money stock, we show that there can exist multiple nontrivial monetary steady states. One of these steady states is a saddle, while the other can be a sink. Paths approaching these steady states can display damped endogenous fluctuations, and development trap phenomena are common. Across different steady states, low capital stocks are associated with high nominal interest rates; the latter signal the comparative inefficiency of the financial system. Also, increases in the steady state inflation rate can easily reduce the steady state capital stock.
  • Capital ; Liquidity (Economics) ; Monetary policy
  • RePEc:fip:fedrwp:94-05
Language
  • English
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