Inflation, investment and growth: A money and banking approach

Arbeitspapier

Output growth, investment and the real interest rate are all found empirically to be negatively affected by inflation. But a seeming puzzle arises of opposite Tobin-like inflation effects because theory indicates a negative Tobin effect when investment falls and a positive Tobin effect when the real interest rate rises. We define inflation's Tobin effect more specifically in terms of the effect on the capital to effective labor ratio and resolve the puzzle by showing the simultaneous occurrence of all three negative inflation effects, on growth, investment and real interest rates, in a model calibrated to postwar US data. Here, investment along with consumption are exchanged for within a monetary endogenous growth economy with human capital and a decentralized credit-producing sector.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Cardiff Economics Working Papers ; No. E2008/18

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Financial Markets and the Macroeconomy ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Monetary Growth Models
• Subject: inflation ; investment ; growth ; Tobin ; Geldpolitik ; Inflation ; Investition ; Kapitalintensität ; Zins ; Wirtschaftswachstum ; Tobin's Q ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gillman, Max ; Kejak, Michal
• Event: Veröffentlichung
• (who): Cardiff University, Cardiff Business School
• (where): Cardiff
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/65799
• Last update: 10.03.2025, 11:42 AM CET