Hyperbolic Discounting and the Phillips Curve

Authors


  • For useful comments we thank Christian Merkl, Andrew Oswald, seminar participants at the European Central Bank and the Kiel Institute for the World Economy, the editor, and two anonymous referees.

Abstract

Using a standard dynamic general equilibrium model, we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables.

Ancillary