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Inflation, investment and growth: a money and banking approach

Gillman, Max and Kejak, Michal 2011. Inflation, investment and growth: a money and banking approach. Economica 78 (310) , pp. 260-282. 10.1111/j.1468-0335.2009.00814.x

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Output growth, investment and the real interest rate in long-run evidence tend to be negatively affected by inflation. Theoretically, inflation acts as a human capital tax that decreases output growth and the real interest rate, but increases the investment rate, opposing evidence. This paper resolves this puzzle by requiring exchange for investment as well as consumption. Inflation then decreases the investment rate, and still decreases both output growth and real interest up to some moderately high rate of inflation, above which increasingly low investment finally causes capital to fall relative to labour, and the real interest rate to rise.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Q Science > QA Mathematics
Publisher: Wiley-Blackwell
ISSN: 0013-0427
Last Modified: 19 Mar 2016 22:30

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