التفاصيل البيبلوغرافية
| العنوان: |
THE INTEREST-INDUCED WEALTH EFFECT AND THE BEHAVIOR OF REAL AND NOMINAL INTEREST RATES: A COMMENT. |
| المؤلفون: |
MEYER, LAURENCE H.1, YAWITZ, JESS B.2 |
| المصدر: |
Journal of Finance (Wiley-Blackwell). Jun77, Vol. 32 Issue 3, p939-948. 10p. |
| مصطلحات موضوعية: |
*INTEREST rates, *INTEREST rate parity theorem, *FINANCIAL ratios, *WEALTH, *INVESTMENT interest, *MATHEMATICAL economics, *MONETARY policy, *ECONOMIC indicators, *ECONOMETRIC models, *MONETARY theory |
| مستخلص: |
In a recent article published in this Journal Burton Zwick [6] investigates the implications of the interest-induced wealth effect for the response of interest rates to monetary change and to changes in the expected inflation rate. He argues that the introduction of the interest-induced wealth effect into an otherwise conventional macroeconomic model can explain the complete snap-back of interest rates to their original level after a monetary change but prior to a complete adjustment of the price level and the delay in the response of nominal interest rates to a change in the expected inflation rate. He also explores the implications of the interest-induced wealth effect for the existence of neutrality and the dynamic adjustment of interest rates to monetary change at full employment. Zwick's analysis of the interest induced wealth effect is flawed in three ways: (1) He incorrectly integrates the interest-induced wealth effect into his IS-LM framework. (2) Although Zwick's model with wealth effects includes both price and interest-induced wealth effects, Zwick ignores the implications of the price-induced wealth effect. Therefore, his comparative static results for increases in the money supply and the expected inflation rate are inconsistent with the model he presents; and (3) Zwick misspecifies his wealth variable. He assumes that the nominal value of real assets is unaffected by changes in the price level and that the valuation of real assets is affected by nominal rather than real interest rates. [ABSTRACT FROM AUTHOR] |
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