Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes

S. Boragan Aruoba, Morris Davis and Randall Wright

No 18276, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study models incorporating money, household production, and investment in housing. Inflation, as a tax on market activity, encourages substitution into household production, and thus investment in household capital. Hence, inflation increases the (appropriately deflated) value of the housing stock. This is documented in various data sources. A calibrated model accounts for a fifth to a half of the observed relationships. While this leaves much to be explained, it demonstrates the channel is economically relevant. We also show models with home production imply higher costs of inflation than models without it, especially when home and market goods are close substitutes.

JEL-codes: E41 E52 R21 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published as Review of Economic Dynamics Available online 25 November 2014 In Press, Corrected Proof — Note to users Cover image Homework in monetary economics: Inflation, home production, and the production of homes ☆ S. Borağan Aruobaa, , , Morris A. Davisb, Randall Wrightc, d, e, f

Downloads: (external link)
http://www.nber.org/papers/w18276.pdf (application/pdf)

Related works:
Journal Article: Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes (2016)
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:nbr:nberwo:18276

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w18276

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().