Inflation and Growth: Impatience and a Qualitative Equivalence
AbstractThis paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money-in-utility-function (MIUF) and transactions-costs (TC) models. We establish a qualitative equivalence between the two models in a setup without a labor-leisure tradeoff. When the time preference is decreasing (or increasing) in consumption and real balances, both the MIUF and TC models are qualitatively equivalent in terms of predicting a negative (or positive) relationship between inflation and growth in a steady state. Both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature. While a decreasing time preference in real balances corroborates with empirical evidence, there is no evidence in support of an increasing time preference in real balances. Copyright (c) 2008 The Ohio State University.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 40 (2008)
Issue (Month): 6 (09)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Been-Lon Chen & Mei Hsu & Chia-Hui Lu, 2007. "Inflation and Growth: Impatience and a Qualitative Equivalence," IEAS Working Paper : academic research 07-A007, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
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