MONEY AND GROWTH IN A RICARDO‐VON NEUMANN‐LEWIS WORLD

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.