Document Type

Article

Publication Date

2015

DOI

10.1111/ecin.12204

Publication Title

Economic Inquiry

Volume

53

Issue

3

Pages

1556-1579

Abstract

Motivated by recent findings on the cyclical movement of both health and health spending, we construct a general equilibrium model that distinguishes health care demand from the demand for other goods. Using this model, we are able to generate inflation dynamics and cyclicality of health that match the US data. When the model is subjected to an expansionary monetary policy shock, it yields different output and inflation responses compared with a two-sector model with homogeneous demand. We show that the trade-off between leisure and health spending plays an important role in model dynamics. The model further predicts different degrees of inflation stabilization across sectors when a shift in the monetary policy occurs.

Comments

Note: This is the author's pre-print version of a work that was published in Economic Inquiry. The final version was published as:

Yagihashi, T., & Du, J. (2015). Health care inflation and it's implications for monetary policy. Economic Inquiry, 53(3), 1556-1579. doi: 10.1111/ecin.12204

Available at: http://onlinelibrary.wiley.com/doi/10.1111/ecin.12204/abstract

ORCID

0000-0001-9916-6008 (Takeshi Yagihashi), 0000-0002-2241-3282 (David Selover)

Original Publication Citation

Yagihashi, T., & Du, J. (2015). Health care inflation and it's implications for monetary policy. Economic Inquiry, 53(3), 1556-1579. doi: 10.1111/ecin.12204

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