Monetary And Economic Growth

The relationship between money and economic growth is a quite disputed issue, and the research document of this field has been already voluminous. By dint of the new analyzing frame of the Endogenous Growth Theory, and based on the researches of Robert Lucas (1988), Benhabib and Farmer (1994), Fukuda (1996), Itaya and Mino (2003), the paper not only developed a new monetary growth model, but also check the main conclusions of the model with the real data of East Asia countries (districts). The logic relationship between money and economic growth go through the whole paper. Through literature abstraction, theory expanding and positive research, we can draw some conclusions as follows:Firstly, in Lucas Economy, the Non-linear distribution of time between production, study and leisure leads to the Multiple equilibrium path of the economic growth, and thus engenders different economic growth. When modeling, we conform the "learning by doing" of the Endogenous Growth mechanism of Lucas and the particular human capital investment. And through distinguishing the productive laboring and learning laboring, we bring forward the new concept of "generalized laboring supply" and "generalized employment level", and it figures out that the main power of the endogenous economic growth is the accumulation of human capital. When the overflowing effect of human capital appears, the economy would grow faster.Secondly, when money is introduced into the Endogenous Growth Model through the transaction cost function, the technique characteristic of economic transaction (such as the structure and efficiency of financial system) and the deciding effect from the equilibrium economic growth to money effect are quite important. Only when there is completely no market attrition in the model, and no pecuniary transaction during the purchasing process or the transaction cost is invariable, the superneutrality of money can come into existence. Generally speaking, the alteration of increase rate of money would have substantial influence on the real economy. But the act of money on economic growth depends on transaction technique and the growth paths. So theoretically, there is no universal monetary policy regulation that suit every country and district. Suppose that the developed economy of more liquidity owns more advanced transaction techniques, and people from rich countries with highemployment rate prefer to enjoy leisure, then, the growth effect of money in developed countries is lower than that in developing countries.Thirdly, the reallocation effects of inflation to resources are realized through the assignment of time of agents in this model. Inflation mainly affects the human capital construction of agents instead of the laboring that invested directly into production. Therefore, in long terms, the monetary policies not only influence the speed of economic growth, but also influences technology advancement. This conclusion partly attests to the viewpoints of the New Keynesianism. They believe that, the Philips Curve would be vertical in a long term. But, if the human capital construction of agents revises economic cycles, then the traditional Philip Curve would go on.Fourthly, through demonstration, we found that in East Asia, the money supply is positively related with economic growth, while inflation is negative related with economic growth. As a whole, the influences from the inflation on economic growth are not as robust as that from the money variables. When we re-check the effect from money supply to economic growth with the extended versions of the Neoclassical Growth Models, money is not the key factor that influences economic growth. Moreover, watching from the one-by-one estimate of single economy, the direction and strength of influence from money to economic growth is quite different from country to country. The reasons of these differences can be explained by the theoretical model of this paper- that is, the differences might be aroused by the diversities of transaction techniques and its distinct growing paths of different economy.Fifthly, after the World War II, by sustaining steady macroeconomic environment, which includes a proper inflation level that can encourage high saving rate, long-term investment and fixed capital forming, accelerates the economic growth in some extent. And both theory and demonstration approve the conclusion of "limited effect" and "phase effect" of monetary policies. That is to say, some certain "threshold" surly exists in the impact from money or inflation to economic growth. Furthermore, the positive effect of expanding monetary policies would decrease as the country grows from a developing country to a developed country. Therefore, the prospective monetary policy not only should be coordinated with the natural endowment advantage and the historical development of transaction technique of a country, but also have to take endogenesis of money during the economic development into consideration. To the developing countries, as long as the inflation rate can becontrolled within some gentle extension, then sustaining relatively high money growth rate is not always adverse to economic growth.Based on the theoretical model, we choose several angles to explain the differences of money effect during the economic development in East Asia. We investigated the switchover of the factor endowment advantage in East Asia (the ones that are similar to "the wild goose walks mode" of industry's development), the financial structure of East Asia, the commonness and characteristics of its financial efficiency and the policy effect of how the money endogenesis process will influence the money supply. Generally, the effects from those factors are long-term and gradual, thus the money authorities can hardly manage in a short term. Moreover, with the economic development and the financial liberalization process, the measurability and controllability of the money supply are reduced gradually, and the monetary multiplier becomes unstable day by day. In this case, how to improve the initiative and validity that the monetary policies are operated, and how to assort the short-term goals with long-term goals of monetary policies, will become the new subject for research.