Inflation Expectations, Wealth Perception, and Consumption Expenditure
The literature on wealth perception has been focused on the tax discounting of government bonds and, to a lesser extent, the Pesek-Saving effect. The authors consider here, in addition, the effects of expected inflation on wealth perception. In the resulting broadened framework, they find empirically that there is overwhelming expected-inflation discounting of money, but little or no tax discounting of bonds. This has far-reaching policy implications that are contrary to conventional wisdom. Based on an examination of equilibrium consumption, bond-financed budget deficits are, surprisingly, found to be more stimulative than money-financed deficits. More importantly, open-market operations not only turn out to be the least potent, but can in fact produce perverse effects.
Year of publication: |
1988
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Authors: | Chiang, Alpha C. ; Miller, Stephen M. |
Published in: |
Eastern Economic Journal. - Eastern Economic Association - EEA, ISSN 0094-5056. - Vol. 14.1988, 1, p. 27-38
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Publisher: |
Eastern Economic Association - EEA |
Saved in:
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