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Anticipation of Future Consumption: A Monetary Perspective

João Ricardo Faria and Peter McAdam

Journal of Money, Credit and Banking, 2013, vol. 45, issue 2‐3, 423-447

Abstract: We adapt the monetary model (Sidrauski 1967) to study the hypothesis of anticipation of future consumption. We assume that anticipation of future consumption affects an agent’s instantaneous utility and that all effects of future consumption on current well‐being are captured by the stock of future consumption. Monetary policy effectiveness is thereby reduced and a zero nominal lower interest rate (and thus the Friedman rule) is destabilizing. Given this, we can derive a “just stable” equilibrium nominal interest rate with matching definitions for inflation and monetary growth. We demonstrate that these implied lower bounds match their historical analogues well.

Date: 2013
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https://doi.org/10.1111/jmcb.12008

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Journal Article: Anticipation of Future Consumption: A Monetary Perspective (2013) Downloads
Working Paper: Anticipation of future consumption: a monetary perspective (2012) Downloads
Working Paper: Anticipation of Future Consumption: A Monetary Perspective (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:45:y:2013:i:2-3:p:423-447

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