Inflation, Financial Development and Human Capital-Based Endogenous Growth: an Explanation of Ten Empirical Findings

Abstract

The paper presents a general equilibrium that can explain ten related sets of empirical results, providing a unified approach to understand usually disparate effects typically treated separately. These are grouped into two sets, one on financial development, investment and inflation, and one on inflations effect on other economy-wide variables such as growth, real interest rates, employment, and money demand. The unified approach also contributes a systematic explanation of certain nonlinearities that are found across these results, as based on the production function for financial intermediary services and the resultant money demand function.Inflation, financial development, growth, exchange credit production