| Abstract: | It is well known (Tobin (1965)) that in a monetary economy with full employment the monetary growth rate uniquely determines the steady-state capital intensity of the economy. This paper demonstrates that portfolio balance in a Ricardo-Von Neumann-Lewis world implies that the steady-state growth rate of the economy (the rate of capital accumulation) is uniquely determined by the rate of monetary growth. An increase in the monetary growth rate increases the steady-state inflation rate which, through its effect on savings, increases the equilibrium growth of the economy. |
