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Money and Specialization in a Neoclassical Growth Model
- Journal of Money, Credit, and Banking
- The Ohio State University Press
- Volume 37, Number 5, October 2005
- pp. 969-975
- 10.1353/mcb.2005.0050
- Article
- Additional Information
This paper studies the links between money, specialization, and capital accumulation in a neoclassical growth framework. For tractability, the transactions role of money is introduced through a cash-in-advance constraint. In contrast to the standard cash-in-advance model, an individual's reliance on money balances for transactions is endogenous through the choice of specialization. Although the cash-in-advance constraint only applies to consumption, the model exhibits a reverse-Tobin effect.We conclude by discussing the implications of the model for the welfare costs of inflation.