Anticipated policy and endogenous growth in a small open monetary economy

This paper analyzes the effects of a preannounced change in the growth rate of credit in a small open economy. The model, based on an endogenous growth model, introduces the adjustment
costs for investment & the role of money in the production function & highlights the dynamic behavior of an open economy. We show that an increase in the rate of anticipated credit growth lowers the steady-growth rate of capital, real money balances, & real output. We also find that the rate of depreciation of the domestic currency will rise steadily toward its stationary level. The anticipated domestic credit growth hence exhibits monetary nonsuperneutrality in both the rate & the level of output in the intermediate & the long run.