Random Matching and Money in the Neoclassical Growth Model: Some Analytical Results
20 Pages Posted: 8 Aug 2009
Date Written: August 6, 2009
Abstract
I use the monetary version of the neoclassical growth model developed by Aruoba, Waller and Wright (2008) to study the properties of the model when there is exogenous growth. I first consider the planner’s problem, then the equilibrium outcome in a monetary economy. I do so by first using proportional bargaining to determine the terms of trade and then consider competitive price taking. I obtain closed form solutions for the balanced growth path of all variables in all cases. I then derive closed form solutions for the transition paths under the assumption of full depreciation and, in the monetary economy, a non-stationary interest rate policy.
Keywords: Money, Growth, Capital, Search
JEL Classification: E20, E40, O42
Suggested Citation: Suggested Citation
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