TY  - JOUR
AU  - Turnovsky,Stephen J.
TI  - Monetary Growth, Inflation, and Economic Activity in a Dynamic Macro Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2133
PY  - 1988
Y2  - October 1988
UR  - http://www.nber.org/papers/w2133
L1  - http://www.nber.org/papers/w2133.pdf
N1  - Author contact info:
Stephen Turnovsky
Department of Economics
301 Savery Hall; Mail Stop DK 30
University of Washington
Seattle, WA   98195
Tel: 206-545-8028
E-Mail: sturn@u.washington.edu
AB  - This paper analyzes the effects of an increase in the monetary growth rate within a dynamic optimizing macroeconomic model. Both the short-run and long-run effects, and therefore the adjustments along the transitional path, depend critically upon the tax structure and the firm's corresponding optimal financial decisions. With all bond financing, the effects depend upon the extent to which interest payments are tax deductible for corporations. If this is sufficiently high, the effects of an increase in the monetary growth rate are generally expansionary. With low interest deductibility, or if the tax structure induces equity financing, the effects arc generally contractionary.
ER  -