Can monetary policy affect long-term economic growth? This paper explores the relationship between monetary growth, inflation, and capital accumulation. The paper's abstract shows that increasing the rate of monetary growth increases the capital-labor ratio in the long run when the initial inflation rate is low but decreases the capital-labor ratio when the inflation rate is high. The study offers a theoretical underpinning for the empirical finding by Bullard and Keating (1996), suggesting that inflation has positive real effects for low-inflation countries in the long run, but negative effects for higher-inflation countries. This paper provides a theoretical justification for the empirical result by Bullard and Keating (1996) that inflation has positive real effects for low-inflation countries in the long run but negative effects for higher-inflation countries. In conclusion, this paper shows that increasing the rate of monetary growth increases the capital-labor ratio in the long run when the initial inflation rate is low but decreases the capital-labor ratio when the inflation rate is high. This paper provides a theoretical justification for the empirical result by Bullard and Keating (1996).
Published in The Singapore Economic Review, this paper is relevant due to its focus on economic theory and policy. The analysis of money, inflation, and capital accumulation aligns with the journal's interest in macroeconomic issues and their impact on economic development.