ME  Vol.4 No.6 , June 2013
A Tale of Two Motives: Endogenous Time Preference, Cash-in-Advance Constraints and Monetary Policy
Author(s) Eric Kam*
ABSTRACT

This paper demonstrates the effects of modeling an endogenous rate of time preference and two cash-in-advance constraints. If the constraint is levied on consumption and capital goods, time preference effects are neutral and cash-in-advance constraint effects invert the Tobin Effect. If the constraint applies solely to consumption goods, opposing motives are offsetting and monetary policy is super neutral.


Cite this paper
E. Kam, "A Tale of Two Motives: Endogenous Time Preference, Cash-in-Advance Constraints and Monetary Policy," Modern Economy, Vol. 4 No. 6, 2013, pp. 427-430. doi: 10.4236/me.2013.46045.
References
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[3]   T. Swan, “Economic Growth and Capital Accumulation,” Economic Records, Vol. 32, No. 2, 1956, pp. 334-361. doi:10.1111/j.1475-4932.1956.tb00434.x

[4]   A. Stockman, “Anticipated Inflation and the Capital Stock in a Cash-In-Advance Economy,” Journal of Monetary Economics, Vol. 8, No. 3, 1981, pp. 387-393. doi:10.1016/0304-3932(81)90018-0

[5]   E. Kam, “A Note on time Preference and the Tobin Effect,” Economics Letters, Vol. 89, No. 1, 2005, pp. 127-132. doi:10.1016/j.econlet.2005.05.021

[6]   H. Uzawa, “Time Preference, the Consumption Function, and Optimal Asset Holdings,” In: J. Wolfe, Ed., Value, Capital and Growth: Papers in Honour of Sir John Hicks, Aldine Publishing Company, Chicago, 1968, pp. 485-505.

 
 
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