INFLATION AND GROWTH WITH THE MIU APPROACH AND THE EQUATION OF EXCHANGE
INFLATION AND GROWTH WITH THE MIU APPROACH AND THE EQUATION OF EXCHANGE

Summary/Abstract: The purpose of this paper is to study a relationship between growth and inflation on the basis of the Tobin growth model. We deviate from the Tobin approach by determining money demand with the money-in-utility (MIU) approach. The utility is affected by money holding. The utility function is applied by an alternative approach proposed by Zhang. The wealth accumulation a key determinant of economic growth. The government supplies money which is described by the traditional equation of exchange. The velocity of money is determined as a function of the rate of interest as in the Baumol-Tobin model. We build the dynamic model and simulate the motion of the model. We carry out comparative dynamic analysis in various parameters.

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