Abstract

Using Gong and Zou’s (2001) model, we reexamine the steady-state effect of monetary growth on the capital stock in the presence of a wealth-induced social status. We find that inflation negatively affects the long-run capital stock if all investment and consumption goods are liquidity constrained. Moreover, if all consumption goods and a fraction of investment goods are liquidity constrained, inflation has an uncertain effect on the long-run capital stock, depending on the extent of the desire for a wealth-induced social status. These results stand in contrast to those of Gong and Zou (2001).

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Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 657-661
Launched on MUSE
2003-07-17
Open Access
No
Archive Status
Archived 2007
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