A Note on Local Stability Conditions for Two types of Monetary Models with Recursive Utility

This note explores local stability conditions for money-in-utility-function (MIUF) and transaction-costs (TC) models with recursive utility. Although Chen et al. [Chen, B.-L., M. Hsu, and C.-H. Lin, 2008, Inflation and growth: impatience and a qualitative equivalent, Journal of Money, Credit, and Banking, Vol. 40, No. 6, 1310-1323] investigated the relationship between inflation and growth in MIUF and TC models with recursive utility, they conducted only a comparative static analysis in a steady state. By establishing sufficient conditions for local stability, this note proves that impatience should be increasing in consumption and real balances. Increasing impatience, although less plausible from an empirical point of view, receives more support from a theoretical viewpoint.