This paper demonstrates the effects of modeling an endogenous rate of time preference and two cash-in-advance constraints. If the constraint is levied on consumption and capital goods, time preference effects are neutral and cash-in-advance constraint effects invert the Tobin Effect. If the constraint applies solely to consumption goods, opposing motives are offsetting and monetary policy is super neutral.
This paper demonstrates the effects of modeling an endogenous rate of time preference and two cash-in-advance constraints. If the constraint is levied on consumption and capital goods, time preference effects are neutral and cash-in-advance constraint effects invert the Tobin Effect. If the constraint applies solely to consumption goods, opposing motives are offsetting and monetary policy is super neutral.
A Tale of Two Motives: Endogenous Time Preference, Cash-in-Advance Constraints and Monetary Policy
