TY - JOUR
T1 - Inflation and growth
T2 - Impatience and a qualitative equivalence
AU - Chen, Been Lon
AU - Hsu, Mei
AU - Lu, Chia Hui
N1 - Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2008/9
Y1 - 2008/9
N2 - This 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.
AB - This 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.
KW - Endogenous time preferences
KW - Qualitative equivalence
KW - Superneutrality
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U2 - 10.1111/j.1538-4616.2008.00159.x
DO - 10.1111/j.1538-4616.2008.00159.x
M3 - Short survey
AN - SCOPUS:49649090874
VL - 40
SP - 1309
EP - 1323
JO - Journal of Money, Credit and Banking
JF - Journal of Money, Credit and Banking
SN - 0022-2879
IS - 6
ER -