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  • Cited by 3
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    This article has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Miyazaki, Kenji 2013. On recursive utility and the superneutrality of money. Economic Modelling, Vol. 32, p. 483.


    Lahiri, Radhika and Magnani, Elisabetta 2012. Endogenous skill heterogeneity and inflation. Economic Modelling, Vol. 29, Issue. 5, p. 1745.


    Aoki, Yoshimasa and Tomoda, Yasunobu 2009. Optimal money supply in models with endogenous discount factor. The Quarterly Review of Economics and Finance, Vol. 49, Issue. 3, p. 798.


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THE INFLATION TAX, VARIABLE TIME PREFERENCE, AND THE BUSINESS CYCLE

  • Radhika Lahiri (a1)
  • DOI: http://dx.doi.org/10.1017/S1365100501010021
  • Published online: 01 September 2002
Abstract

This paper investigates the impact of anticipated inflation on features of the business cycle in the presence of recursive but intertemporally dependent tastes. Intertemporal dependence is induced by the presence of a variable or endogenous individual rate of time preference. Quantitative experiments indicate that variability in the rate of time preference can enhance the contribution of monetary shocks to the fluctuations of real variables. Another implication of the variable-time-preference model is that, unlike the fixed time preference model, the business cycle features in high inflation and low inflation economies can be very different. The contribution of monetary shocks to fluctuations increases partly because endogenous time preference accentuates inflation-tax effects, which are already present in the standard framework because of the presence of cash-in-advance constraints. The change in the relative role of monetary shocks is also related to how variable time preference alters the effects of technology shocks, which can be quantitatively or qualitatively different in comparison to the standard model, depending on the parameters of the model.

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Corresponding author
Address correspondence to: Radhika Lahiri, School of Economics and Finance, Faculty of Business, Queensland University of Technology, GPO Box 2434, 2 George Street, Brisbane, Queensland 4001, Australia; e-mail: r.lahiri@qut.edu.au.
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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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