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The cost-of-living index in a cash and credit goods economy

Published online by Cambridge University Press:  27 June 2022

Toyoichiro Shirota
Toyoichiro Shirota*
Affiliation:
Aoyama Gakuin University, 4-4-25 Shibuya, Shibuya-ku, Tokyo, 150-8366, Japan
*
Email: [email protected].
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Abstract

This study constructs a cost-of-living index in a cash-credit goods economy. I first argue that the conventional cost-of-living index entails internal inconsistency when applied to the cash-credit goods economy and then develop an internally consistent cost-of-living index. This new index suggests that the interest rate directly affects the cost of living, and that its effect is asymmetric. Applying the index to the US data for the past 20 years suggests that this effect on the aggregate price index is quantitatively nonnegligible.

Keywords

Cost-of-living indexcash-in-advancecash-credit goods
Type
Articles
Information
Macroeconomic Dynamics , Volume 27 , Issue 5 , July 2023 , pp. 1383 - 1396
Copyright
© The Author(s), 2022. Published by Cambridge University Press

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Footnotes

*

I thank Shigenori Shiratsuka, Ippei Fujiwara, Ryo Kimoto, and Kosuke Arai for the discussion at the early stage of this project. All errors are on my own. This study was supported by JSPS KAKENHI Grant Number JP21K01396.

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