Capital Trading, Stock Trading, and the Inflation Tax on Equity: A Note
11 Pages Posted: 2 Nov 2007
Date Written: December 2003
Abstract
In "Capital Trading, Stock Trading, and the Inflation Tax on Equity," Chami, Cosimano, and Fullenkamp (2001) (hereafter, CCF) analyze a cash-in-advance model in which capital goods are explicitly traded. The authors show that there is more responsiveness of consumption and output to changes in the money supply than exists in the standard neoclassical growth models. This note demonstrates that this arises because CCF implicitly imposed an additional equilibrium restriction on the Cooley and Hansen (1989) model. This restriction can be imposed only if the Cooley and Hansen model is subject to real indeterminacy which occurs whenever the risk aversion coefficient (denoted by lambda in the CCF paper) exceeds 2.
Keywords: used-capital market, indeterminacy
JEL Classification: C68, E32, E44
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Equity Premium: Consistent with GDP Growth and Portfolio Insurance
-
Asset Prices and Interest Rates in Cash-in-Advance Models
By Alberto Giovannini and Pamela Labadie
-
Average Marginal Tax Rates U.S. Household Interest and Dividend Income 1954-80
By Arturo Estrella and Jeffrey C. Fuhrer
-
Ownership of Capital in Monetary Economies and the Inflation Tax on Equity
By Ralph Chami, Thomas F. Cosimano, ...
-
Ownership of Capital in Monetary Economies and the Inflation Tax on Equity
By Ralph Chami, Thomas F. Cosimano, ...
-
Equity Duration - Updated Duration of the S&P 500
By David M. Blitzer, Srikant Dash, ...
-
Equity Duration – Updated Duration of the S&P 500
By David M. Blitzer, Srikant Dash, ...