Inflation Expectations, Wealth Perception, and Consumption Expenditure
The literature on wealth perception has been focused on the tax discounting of government bonds and, to a lesser extent, the Pesek-Saving effect. The authors consider here, in addition, the effects of expected inflation on wealth perception. In the resulting broadened framework, they find empirically that there is overwhelming expected-inflation discounting of money, but little or no tax discounting of bonds. This has far-reaching policy implications that are contrary to conventional wisdom. Based on an examination of equilibrium consumption, bond-financed budget deficits are, surprisingly, found to be more stimulative than money-financed deficits. More importantly, open-market operations not only turn out to be the least potent, but can in fact produce perverse effects.
Volume (Year): 14 (1988)
Issue (Month): 1 (Jan-Mar)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Are Government Bonds Net Wealth?,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
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