Endogenous Time Preference In Monetary Growth Model
The authors study the otherwise standard growth model with money except endogenous time preferences determined by resources spent on imagining future pleasures along the line of Becker and Mulligan (1997). Money plays a role in transactions via the cash-in-advance constraint. The resulting steady-state condition can be simplified to the standard textbook diagram in terms of two loci. They analyze the relationship between monetary growth and capital accumulation. If spending on imagining future pleasures is not constrained by cash, the existing relationship no longer holds. The optimum quantity of money is studied.