Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes /
Aruoba, S. Boragan.
Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes / S. Boragan Aruoba, Morris A. Davis, Randall Wright. - Cambridge, Mass. National Bureau of Economic Research 2012. - 1 online resource: illustrations (black and white); - NBER working paper series no. w18276 . - Working Paper Series (National Bureau of Economic Research) no. w18276. .
August 2012.
We study models incorporating money, household production, and investment in housing. Inflation, as a tax on market activity, encourages substitution into household production, and thus investment in household capital. Hence, inflation increases the (appropriately deflated) value of the housing stock. This is documented in various data sources. A calibrated model accounts for a fifth to a half of the observed relationships. While this leaves much to be explained, it demonstrates the channel is economically relevant. We also show models with home production imply higher costs of inflation than models without it, especially when home and market goods are close substitutes.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes / S. Boragan Aruoba, Morris A. Davis, Randall Wright. - Cambridge, Mass. National Bureau of Economic Research 2012. - 1 online resource: illustrations (black and white); - NBER working paper series no. w18276 . - Working Paper Series (National Bureau of Economic Research) no. w18276. .
August 2012.
We study models incorporating money, household production, and investment in housing. Inflation, as a tax on market activity, encourages substitution into household production, and thus investment in household capital. Hence, inflation increases the (appropriately deflated) value of the housing stock. This is documented in various data sources. A calibrated model accounts for a fifth to a half of the observed relationships. While this leaves much to be explained, it demonstrates the channel is economically relevant. We also show models with home production imply higher costs of inflation than models without it, especially when home and market goods are close substitutes.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.