Nominal income targeting versus money growth targeting in an endogenously growing economy

Monetary Rules and Endogenous Growth in an Open Economy

“…Second, in the context of a closed-economy model, Mino (2003, 2007), Lai et al (2005), Suen and Yip (2005), and Yip and Li (2006) show that the rule of money growth rate targeting may result in local indeterminacy. 11 Mino (2003, 2007) find that local indeterminacy may emerge when labor externalities are sufficiently large.…”

“…11 Mino (2003, 2007) find that local indeterminacy may emerge when labor externalities are sufficiently large. Lai et al (2005) specify that the representative household holds both domestic bonds and money balances as assets, and find that the elasticity of the domestic interest rate with respect to the real balancesoutput ratio is crucial for the emergence of indeterminacy. Jha et al (2002), Suen and Yip (2005), Itaya and Mino (2007), and Chen and Guo (2008) set up a monetary endogenous growth model where money is introduced via either a transactions cost technology or a cash-in-advance constraint.…”

The New Keynesian Model and the Euro Area Business Cycle*

“…One is to assume that goods purchases require time resources, as initially described by McCallum and Goodfriend (1987), and more recently used in Chadha, Haldane and Janssen (1998), Pakko (1998) and De Fiore and Teles (2003). The other alternative, which is taken in this paper, is to assume that transaction costs require output usages from the household budget constraint, as in Feenstra (1986), Sims (1994), McCallum (2000) and Lai, Chen and Shaw (2005). In any case, real money holdings should be included in the transactions technology reflecting the advantages of possessing the medium of exchange when conducting transactions.…”