Anticipation of future consumption: a monetary perspective
Peter McAdam () and
Joao Faria
No 1448, Working Paper Series from European Central Bank
Abstract:
We adapt the (Sidrauski, 1967) monetary model 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 wellbeing 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. JEL Classification: E41, D91, O42
Keywords: anticipation; consumption behavior; Friedman rule; money and growth; money demand; stability (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-mon
Note: 50336
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1448.pdf (application/pdf)
Related works:
Journal Article: Anticipation of Future Consumption: A Monetary Perspective (2013) 
Journal Article: Anticipation of Future Consumption: A Monetary Perspective (2013) 
Working Paper: Anticipation of Future Consumption: A Monetary Perspective (2012) 
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:ecb:ecbwps:20121448
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().