A Revised Tobin Effect from Inflation: Relative Input Price and Capital Ratio Realignments, Us and UK, 1959-1999
CEU Dept. of Economics Working Paper No. 4/2001
59 Pages Posted: 3 Sep 2001
Date Written: 2001
The paper studies the realignments induced by inflation within an endogenous growth monetary economy. Accelerating inflation raises the ratio of the real wage to the real interest rate, and so raises the use of physical capital relative to human capital across all sectors. We find cointegration evidence for the US and UK economies consistent with a general equilibrium, Tobin-type, effect of inflation on input prices, and capital intensity, even while the growth rate of output is reduced by inflation.
JEL Classification: O42, C22, E13
Suggested Citation: Suggested Citation