The Liquidity Effects and the Welfare Costs of Inflation in a Monetary General Equilibrium Model of Europe PDF Download
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Author: W. Bolt
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: W. Bolt
Publisher:
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Category :
Languages : en
Pages :
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Author: Mr.Howell H. Zee
Publisher: International Monetary Fund
ISBN: 1451853440
Category : Business & Economics
Languages : en
Pages : 22
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This paper provides general equilibrium estimates of the steady-state welfare gains of lowering inflation from a low level to close to price stability, using an overlapping-generations growth model. Money demand is modeled on the basis that real money balances are a factor of production. Assuming a standard Fisher equation modified by the presence of an income tax, it is found that inflation unambiguously reduces capital intensity, drives up the before-tax real rate of return to capital, and unambiguously imposes a life-time welfare cost. This welfare cost is, however, quantitatively very modest (under 0.2 percent of GDP annually) within reasonable ranges of all parameter values.
Author: Michael Dotsey
Publisher:
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Languages : en
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This paper presents a general equilibrium monetary model in which inflation distorts a variety of marginal decisions. Although individually none of the distortions is very large, they combine to yield substantial welfare cost estimates. A sustained 4 percent inflation like that experienced in the US since 1983 costs the economy the equivalent of 0.41 percent of output per year when currency is identified as the relevant definition of money and over 1 percent of output per year when M1 is defined as money. The results illustrate how the traditional, partial equilibrium approach can seriously underestimate the true cost of inflation.
Author: C. Angyridis
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper examines the costs associated with the level and variability of inflation in the context of a general equilibrium (GE) welfare measure which accommodates the optimal adjustments of all the endogenous variables in the model in response to the transfers received by the households. We compare and contrast the GE welfare costs with the conventional consumption equivalent (CE) measure across three utility functions that have been used routinely in the macroeconomics literature. We find that the GE welfare costs of inflation are substantially larger than those computed with the CE measure.
Author: Mary Morgan
Publisher: Routledge
ISBN: 113457312X
Category : Business & Economics
Languages : en
Pages : 416
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This collection, written by highly-placed practitioners and academic economists, provides a picture of how economic modellers and policy makers interact. The book provides international case studies of particular interactions between models and policy making, and argues that the flow of information is two-way.
Author: Max Gillman
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 17
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Author: Rubens Penha Cysne
Publisher:
ISBN:
Category :
Languages : en
Pages : 10
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This work presents closed-form solutions to Lucas's (2000) general equilibrium expression for the welfare costs of inflation, as well as to the difference between the general-equilibrium measure and Bailey's (1956) partial-equilibrium measure. In Lucas's original work only numerical solutions are provided.
Author: Karl-Heinz Tödter
Publisher:
ISBN: 9783865583659
Category :
Languages : de
Pages : 64
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This paper reviews theory and evidence of the welfare effects of inflation from a cost benefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More recently, interactions of inflation and taxation came into focus. Growth effects of inflation as well as welfare effects of unanticipated inflation and of inflation uncertainty are also addressed. To assess the policy question whether inflation should be reduced or eliminated, the costs of disinflation play a role. Finally, the trade-off between the benefits of reducing inflation and the costs of disinflation is discussed and an overall assessment of the net welfare effects of achieving price stability is provided.
Author: Karl-Heinz Tödter
Publisher:
ISBN:
Category :
Languages : en
Pages : 72
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Book Description
This paper reviews theory and evidence of the welfare effects of inflation from a costbenefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More recently, interactions of inflation and taxation came into focus. Growth effects of inflation as well as welfare effects of unanticipated inflation and of inflation uncertainty are also addressed. To assess the policy question whether inflation should be reduced or eliminated, the costs of disinflation play a role. Finally, the trade-off between the benefits of reducing inflation and the costs of disinflation is discussed and an overall assessment of the net welfare effects of achieving price stability is provided.
Author: Yi Wen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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