A note on “Inflation and Welfare” |
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Authors: | Rubens Penha Cysne |
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Institution: | Graduate School of Economics of the Getulio Vargas Foundation (EPGE/FGV), Praia de Botafogo 190, 11 Andar, CEP 22250-900 Rio de Janeiro, Brazil |
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Abstract: | This note provides an analytical confirmation and a refinement of Lucas Jr., R.E., 2000. Inflation and welfare. Econometrica 68 (62), 247–274 (March)] numerical findings regarding the characterization of optimality in the shopping-time model presented in that paper. The original numerical analysis concludes that a coefficient of risk aversion (σ) greater than 0.01 is sufficient for optimality. Here we use Arrow’s sufficiency theorem to confirm this result and, more importantly, to show without more calculations how changes in parameters can affect it. |
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Keywords: | E40 E50 |
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