Inflation and Growth: Impatience and a Qualitative Equivalence

Been-Lon Chen, Mei Hsu and Chia-Hui Lu
Additional contact information
Mei Hsu: Department of Economics, National Taipei University

No 07-A007, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: This paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money-in-utility-function (MIUF) and transaction costs (TC) models. We establish a qualitative equivalence between the two models in a setup without a labor-leisure tradeoff. When the time preference is decreasing (or increasing) in consumption and real balances, both the MIUF and TC models are qualitatively equivalent in terms of predicting a negative (or positive) relationship between inflation and growth in a steady state. Both a decreasing and an increasing time preference in consumption are consistent with the arguments in the literature. While a decreasing time preference in real balances corroborates with empirical evidence, there is no evidence in support of an increasing time preference in real balances.

Keywords: endogenous time preferences; superneutrality; qualitative equivalence (search for similar items in EconPapers)
JEL-codes: O42 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econ.sinica.edu.tw/~econ/pdfPaper/07-A007.pdf (application/pdf)

Related works:
Journal Article: Inflation and Growth: Impatience and a Qualitative Equivalence (2008)
Journal Article: Inflation and Growth: Impatience and a Qualitative Equivalence (2008)
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:sin:wpaper:07-a007

Access Statistics for this paper

More papers in IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by HsiaoyunLiu (syliou@econ.sinica.edu.tw).