TITLE:
Money and Economic Growth Revisited: A Note
AUTHORS:
Eric Kam, John Smithin
KEYWORDS:
Monetary Super-Neutrality, Money and Growth, Rational Expectations, Real Interest Rate, Wealth Effect
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.1,
January
6,
2022
ABSTRACT: In an important but neglected paper, Begg
(1980) attempted to solve the puz-zle of monetary super-neutrality in the
steady-state. Super-neutrality was shown to depend on two sufficient
conditions, only one of which is necessary. Begg argued that a more general
specification restores monetary non-super-neutrality. This note suggests an
additional sufficient condition for super-neutrality. The demand for real
balances must be modeled as a de-creasing function of the real interest rate.
This has implications for models as-suming a steady-state. Harkness (1978) had
already shown that the extra suf-ficient condition is a necessary condition for
existence.