Inflation, Human Capital and Tobin's q

Parantap Basu (), Max Gillman and Joseph Pearlman

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: A pervasive empirical finding for the US economy is that inflation is negatively correlated with the normalized market price of capital (Tobin's q) and growth. A dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts. In this model, human capital is the principal driver of self-sustained growth. Long run comparative statics analysis suggests that inflation diverts scarce time resource to leisure which lowers human capital utilization. This impacts growth adversely and modulates cap¬ital adjustment cost downward resulting in a decline in Tobin's q. For the short run, a Tobin effect of inflation on growth weakens the negative association between inflation and q.

Date: 2009-05
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-hrm
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Related works:
Journal Article: Inflation, human capital and Tobin's q (2012)
Working Paper: Inflation, Human Capital and Tobin's q (2010)
Working Paper: Inflation, Human Capital and Tobin's q (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:san:cdmacp:0904

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