Inflation, human capital and Tobin's q

Parantap Basu, Max Gillman and Joseph Pearlman

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 7, 1057-1074

Abstract: A strong US postwar low frequency negative correlation exists between inflation and Tobin's q. To explain this, a production-based monetary asset pricing model is formulated with a rising marginal cost of investment, cash-in-advance and human capital based endogenous growth. Higher money supply growth causes higher inflation, lower output growth, and a lower q in the long run. The baseline model simulates well correlations of the US inflation rate and Tobin's q at each frequency of high, business cycle, low, and the “medium term.” It also performs well in correlations and volatilities compared to related exogenous growth versions.

Keywords: Tobin's q; Low frequency; Endogenous growth (search for similar items in EconPapers)
JEL-codes: E44 G12 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Inflation, Human Capital and Tobin's q (2010)
Working Paper: Inflation, Human Capital and Tobin's q (2009)
Working Paper: Inflation, Human Capital and Tobin's q (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:7:p:1057-1074

DOI: 10.1016/j.jedc.2012.02.004

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