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Patience and Inflation

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  • Hübner, Malte
  • Vannoorenberghe, Gonzague

Abstract

Monetary policy makers constantly face an inter-temporal choice problem. By gener- ating surprise inflation they can temporarily increase employment and output. These short-run gains have however to be weighed against the long-run costs associated with higher inflation and a loss of reputation. More patient countries should therefore choose to implement lower inflation. Using cross-country data for up to 88 advanced and emerging economies, we provide empirical evidence that more patient countries had indeed lower average inflation rates over our sample period from 1961 to 2009. To address the possibility that patience may be endogenous to past inflation rates we use information on how the language spoken in a country encodes future time as an instrument for patience. Our results show that patience has a statistically and economically significant impact on inflation.

Suggested Citation

  • Hübner, Malte & Vannoorenberghe, Gonzague, 2015. "Patience and Inflation," MPRA Paper 65811, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65811
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    References listed on IDEAS

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    1. Oasis Kodila‐Tedika & Sherif Khalifa, 2020. "Long‐term vision and economic development," The World Economy, Wiley Blackwell, vol. 43(11), pages 3088-3102, November.

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    More about this item

    Keywords

    Inflation; Patience; Stability Culture;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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