Econometrica: Nov 1979, Volume 47, Issue 6

Capital Accumulation on the Transition Path in a Monetary Optimizing Model<1433:CAOTTP>2.0.CO;2-N
p. 1433-1440

Stanley Fischer

It is well known that in the Sidrauski monetary intertemporal optimizing model the steady state capital stock is invariant to the rate of inflation. This paper shows that the rate of accumulation of capital is not invariant to the rate of inflation and that, for the constant relative risk aversion family of utility functions (except logarithmic), the rate of capital accumulation is faster the higher the growth rate of money. Money is thus not neutral on transition paths.

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