INFLATION AND LIQUIDITY PREFERENCE

INFLATION AND LIQUIDITY PREFERENCE

This paper confutes the widely accepted contention that inflationary expectations cannot affect liquidity preference, by proving that: i) an increase in perfectly anticipated inflation increases the demand for bonds, if the relative risk aversion is increasing; ii) the expected rate of stochastic in...

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Veröffentlicht in:Giornale degli economisti e annali di economia 1987-09, Vol.46 (9/10), p.481-490
1. Verfasser: Monticelli, Carlo
Format: Artikel
Sprache:eng
Schlagworte:
Anticipated inflation
Economic expectations
Economic inflation
Economic uncertainty
Financial investments
Inflation rates
Investment risk
Liquidity preference
Monetary liabilities
Risk aversion
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Zusammenfassung:This paper confutes the widely accepted contention that inflationary expectations cannot affect liquidity preference, by proving that: i) an increase in perfectly anticipated inflation increases the demand for bonds, if the relative risk aversion is increasing; ii) the expected rate of stochastic inflation influences portfolio choices between monetary assets according to a wealth and a substitution effect: iii) the effects of variations in inflation volatility are qualitatively the same as those of changes in the expected rate of stochastic inflation.
ISSN:0017-0097