## The Tobin effect and the Fisher relation

The optimizing models we examined in the previous section share the characteristic of considering a world that consists of a fixed number of large infinitely lived families. Each family makes a decision about how much to consume and save taking into account the welfare of all future generations. As a result the steady-state real interest rate is set according to a modified golden rule and depends only on the rates of time preference and population growth and not on any monetary variables. Thus,...

## Money in the utility and production function

The first formulation of a monetary growth model in an explicitly optimizing framework is due to Sidrauski 1967a . His formulation is based on Ramsey's classic 1928 paper on optimal savings behavior and as a result it resolves the objection to non-optimizing models. An infinitely-lived growing family maximizes the utility of its members by solving an intertemporal maximization problem. Money is introduced by assuming that in addition to consumption, utility is derived from the flow of services...