Money, Wealth, Time Preference, and Marginal Impatience

Abstract

This paper addresses whether the monetary expansion can create wealth in the long-run and how this wealth creation is related to the nature of the marginal impatience when preferences are recursive with money yielding utility to infinitely-lived agents. We show that the neutrality or the non-neutrality of money in terms of wealth creation depends on whether the marginal impatience is increasing, decreasing, or remaining constant. In particular, if the marginal impatience is constant, money is super-neutral and does not affect wealth creation. On the other hand, if the marginal impatience is increasing or decreasing, money is non-super-neutral and affects wealth creation, positively if the marginal impatience is growing in consumption and real balances, and negatively if the marginal impatience is decreasing in consumption and real balances. These results place the long-debated neutrality-of-money issues in perspective concerning wealth creation and time preference.