This chapter conducts a Ramsey analysis within an endogenous growth cashin-advance economy with policy commitment. Credit and money are alternative payment mechanisms that act as inputs into the household production of exchange. The credit is produced with a diminishing returns technology with Inada conditions that implies along the balanced-growth path a degree one homogeneity of effective banking time. This tightens the restrictions found within shopping time economies while providing a production basis for the Ramsey-Friedman optimum that suggests a special case of Diamond and Mirrlees (1971).
Inflation Theory in Economics: Welfare, Velocity, Growth and Business Cycles
Gillman, Max and Yerokhin, Oleg, "Ramsey-Friedman optimality with banking time" (2009). Department of Economics Faculty Works. 3.
Available at: https://irl.umsl.edu/econ-faculty/3