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The Perception of Government Bonds and Money as Net Wealth: An Integrated Approach

Author

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  • Alpha C. Chiang

    (University of Connecticut)

  • Stephen M. Miller

    (University of Connecticutt)

Abstract

Although much work examines whether government bonds constitute net wealth, little attention focuses on whether government money does. Most analysts merely assert that government money is net wealth. In an inflationary environment, however, money experiences "expected-inflation discounting" just as bonds experience "tax discounting." Indeed, Chiang and Miller (1988) find empirical evidence suggesting that the private sector discounts money more heavily than bonds. This paper provides the theoretical underpinnings for the two types of discounting in an integrated approach, where both new money and new bonds can finance the interest on outstanding bonds.

Suggested Citation

  • Alpha C. Chiang & Stephen M. Miller, 1998. "The Perception of Government Bonds and Money as Net Wealth: An Integrated Approach," Eastern Economic Journal, Eastern Economic Association, vol. 24(4), pages 435-448, Fall.
    • Handle: RePEc:eej:eeconj:v:24:y:1998:i:4:p:435-448
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    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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