Article Abstract:
A study was conducted on a perfect-foresight dynamic general equilibrium monetary economy with transactions costs where agents are financially constrained to acquire investment goods. The relationships between equilibrium financing constraints on investment goods, transaction costs and economic growth were evaluated. Results showed that costs linked to raising nominal interest rates from benchmarks are not large, although the welfare and growth effects of reducing nominal interest rates from a benchmark are large.
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Article Abstract:
Buiter's dynamic rational expectations models which contain more stable roots than predetermined variables are reviewed in the context of a particular macroeconomic model. The study concludes that the Buiter's proposed boundary conditions which imply an undesirable dynamic behavior can be attributed to the existence of stable roots in the solution paths of the variables. Hence, the analysis implies that any model which contains too many stable roots is not consistent with economic realities.
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Article Abstract:
New studies on the neutrality of money in a small open economy suggest that money is neutral in unanticipated monetary policy in both the long and short runs. On the other hand, anticipated changes in monetary stock affect the duration of perception and implementation of the said policy. Non-neutrality concerning anticipated monetary expansion is shown with the decline in employment and output in the movement to a new steady-state.
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