TEMPTATION AND SELF-CONTROL IN A MONETARY ECONOMY

Ryoji Hiraguchi

Macroeconomic Dynamics, 2018, vol. 22, issue 4, 1076-1095

Abstract: We construct a microfounded model of money with Gul–Pesendorfer preferences. In each period, agents are tempted to spend all their money by the end of the period, and they suffer from the forgone utility that could have been obtained by adopting the tempting choice. We find that the Friedman rule may not be optimal. A positive nominal interest rate improves welfare because it reduces the real money balances and renders the temptation less attractive. The welfare gained by deviating from the rule is equivalent to 0.67% of consumption.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:22:y:2018:i:04:p:1076-1095_00

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().