In this paper, we study the relationship between the rate of increase of the money supply and the rate of growth of output in an economy. We show that in some models of endogenous growth, inflation has direct effects on the growth rate of the economy. Despite this, the estimated welfare cost of inflation from calibrated examples is similar to that found in exogenous growth models.
Bibliographical noteFunding Information:
We thank the National Science Foundation for financial support and the participants at the NBER Summer Workshop on Growth and the editors of this journal for comments. Any remaining errors are ours.