This paper explores the possible real effects of inflation within a two-sector neoclassical growth model of the Heckscher–Ohlin type with a cash-in-advance constraint on the purchases of consumption goods. The main findings are that the relative prices of both factors and of both goods, which are linked via a Stolper–Samuelson relation, depend only on the rate of time preference, not on any monetary variable; that the steady-state level of total capital can be influenced by inflation if the capital intensities and the cash requirements in both sectors differ, leading to Tobin effects or reversed Tobin effects; and that higher inflation unambiguously reduces total labor supply and leads to a reversed Tobin effect in most cases if the labor/leisure choice is endogenized.
