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Health Care Inflation And Its Implications For Monetary Policy

Author

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  • Takeshi Yagihashi
  • Juan Du

Abstract

Motivated by recent findings on the cyclical movement of both health and health spending, we construct a general equilibrium model that distinguishes health care demand from the demand for other goods. Using this model, we are able to generate inflation dynamics and cyclicality of health that match the US data. When the model is subjected to an expansionary monetary policy shock, it yields different output and inflation responses compared with a two-sector model with homogeneous demand. We show that the trade-off between leisure and health spending plays an important role in model dynamics. The model further predicts different degrees of inflation stabilization across sectors when a shift in the monetary policy occurs . ( JEL E52, E31, E32, I10)

Suggested Citation

  • Takeshi Yagihashi & Juan Du, 2015. "Health Care Inflation And Its Implications For Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 53(3), pages 1556-1579, July.
    • Handle: RePEc:bla:ecinqu:v:53:y:2015:i:3:p:1556-1579
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    Citations

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    Cited by:

    1. Ani Asoyan & Vahagn Davtyan & Haykaz Igityan & Hasmik Kartashyan & Hovhannes Manukyan, 2020. "Modelling the Effects of a Health Shock on the Armenian Economy," Russian Journal of Money and Finance, Bank of Russia, vol. 79(4), pages 18-44, December.
    2. Chak Hung Jack Cheng & Nopphol Witvorapong, 2021. "Health care policy uncertainty, real health expenditures and health care inflation in the USA," Empirical Economics, Springer, vol. 60(4), pages 2083-2103, April.
    3. Yang Hu & Yanran Hong & Kai Feng & Jikai Wang, 2023. "Evaluating the Importance of Monetary Policy Uncertainty: The Long- and Short-Term Effects and Responses," Evaluation Review, , vol. 47(2), pages 264-286, April.
    4. Ani Asoyan & Vahagn Davtyan & Haykaz Igityan & Hasmik Kartashyan & Hovhannes Manukyan, 2020. "Modelling the Effects of a Health Shock on the Armenian Economy," Working Papers 15, Central Bank of the Republic of Armenia, revised Dec 2020.
    5. Islam, Mohammad Monirul & Fatema, Farha, 2020. "Covid-19 and Sustainable Tourism: Macroeconomic Effect and Policy Comparison among Europe, the USA and China," Asian Business Review, Asian Business Consortium, vol. 10(1), pages 53-60.
    6. Yang, Yang & Zhang, Hongru & Chen, Xiang, 2020. "Coronavirus pandemic and tourism: Dynamic stochastic general equilibrium modeling of infectious disease outbreak," Annals of Tourism Research, Elsevier, vol. 83(C).

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • I10 - Health, Education, and Welfare - - Health - - - General

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