Reference : Monetary Policy, Factor Substitution, and Convergence
Scientific journals : Article
Business & economic sciences : Multidisciplinary, general & others
http://hdl.handle.net/10993/28658
Monetary Policy, Factor Substitution, and Convergence
English
Klump, Rainer mailto [University of Luxembourg > Rectorate > Rectorate >]
Jurkat, Anne []
2016
Macroeconomic Dynamics
Cambridge University Press
Yes (verified by ORBilu)
1365-1005
1469-8056
http://hdl.handle.net/10993/28658
In this paper, we examine the influence of monetary policy on the speed of convergence in a standard monetary growth model à la Sidrauski allowing for differences in the elasticity of substitution between factors of production. The respective changes in the rate of convergence and its sensitivities to the central model parameters are derived both analytically and numerically. By normalizing the constant elasticity of substitution (CES) production functions both outside the steady state and within the steady state, it is possible to distinguish between an efficiency and a distribution effect of a change in the elasticity of substitution. We show that monetary policy is the more effective, the lower is the elasticity of substitution, and that the impact of monetary policy on the speed of convergence is mainly channeled via the efficiency effect.

File(s) associated to this reference

Fulltext file(s):

FileCommentaryVersionSizeAccess
Open access
Klump.pdfPublisher postprint481.29 kBView/Open

Bookmark and Share SFX Query

All documents in ORBilu are protected by a user license.