Journal of Economic Growth

, Volume 1, Issue 3, pp 309-332

First online:

Private information, money, and growth: Indeterminacy, fluctuations, and the Mundell-Tobin effect

  • Costas AzariadisAffiliated withUniversity of California at Los Angeles
  • , Bruce D. SmithAffiliated withUniversity of Texas-Austin and Federal Reserve Bank of Minneapolis

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access


We introduce an informational asymmetry into an otherwise standard monetary growth model and examine its implications for the determinacy of equilibrium, for endogenous economic volatility, and for the relationship between steady-state output and the rate of money growth. Some empirical evidence suggests that, for economies with low initial inflation rates, permanent increases in the money growth rate raise long-run output levels. This relationship is reversed for economies with high initial inflation rates. Our model predicts this pattern. Moreover, in economies with high enough rates of inflation, credit rationing emerges, monetary equilibria become indeterminate, and endogenous economic volatility arises.


private information growth indeterminacy

Jel classification

E31 E32 E44 G14 O16