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Identifier to cite or link to this item: https://doi.org/10.15057/17467
Identifier to cite or link to this item: https://hdl.handle.net/10086/17467

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Title
Real Interest Rates as a Measure of Welfare in an Economy with Incentive Constraints
Creator
Creator Name
Suzuki, Shiba Suzuki, Shiba
Affiliation
Affiliation Name
Hitotsubashi University
Key Word
Incomplete markets
dynamic insurance contract
measure of welfare
JEL
E4
G2
Abstract
In this paper, we study the relationship between welfare and real interest rates in Aiyagari and Williamson's (2000) setting. They developed a dynamic insurance contract model with an incomplete market monetary economy and demonstrated that the optimal inflation rate is positive. This paper investigates the relationship between real interest rates and welfare in their model with more precise measures of inflation around the optimal inflation rate. Our numerical results demonstrate that real interest rates and welfare have a positive correlation and suggest that real interest rates can serve as a measure of welfare.
Publisher
Hitotsubashi University
Issued Date
2009-06
Language
English(eng)
Resource Type
departmental bulletin paper
Version Type
VoR
selfDOI
10.15057/17467
ISSN
0018-280x
NCID
AA00207547
Source Title
Hitotsubashi Journal of Economics
Volume Number
50
Issue Number
1
Page Start
47
Page End
56
Appears in Collections
Vol. 50, no. 1 (Jun. 2009)
URL
https://hdl.handle.net/10086/17467