Preferences, inflation, and welfare

Michael Curran and Scott J. Dressler

European Economic Review, 2020, vol. 130, issue C

Abstract: This paper systematically examines how degrees of household risk aversion (RA) and elasticity of intertemporal substitution (EIS) impact the welfare costs of inflation in a heterogeneous-agent environment featuring capital and essential money. Empirical evidence suggests that households have degrees of RA and EIS that differ on average from traditional values and display large amounts of dispersion. Capturing these empirical features of preference values in an otherwise standard model leads to welfare enhancements of inflation due to household substitution of money for capital. The analysis also compares the welfare implications for alternative ways to implement monetary policy.

Keywords: Inflation; Welfare; Ex-ante heterogeneity; Recursive preferences (search for similar items in EconPapers)
JEL-codes: E21 E41 E50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292120302245
Full text for ScienceDirect subscribers only

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:eee:eecrev:v:130:y:2020:i:c:s0014292120302245

DOI: 10.1016/j.euroecorev.2020.103594

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().