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Author:
Publisher:
ISBN:
Category : Electronic books
Languages : en
Pages : 56
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Book Description
'This paper calculates the welfare cost of inflation by focusing on distortions and costs that inflation poses on households who use money for transactions to avoid alternative means of payment and on the losses inflicted on the holders of public debt arising from unexpected inflation. In doing so, we take into account of the role of financial innovation that reduces over time the dependence of households on money to make transactions. We find a sizable aggregate welfare cost of money holdings, but lower than those found in previous studies. The difference mainly comes from the incorporation of financial innovation in our studies. Across households, the old and middle-aged and the poor face higher costs from inflation much more than the young and the rich. Costs are expected to be lower for future generations due to financial innovation'--Non-technical summary.
Author:
Publisher:
ISBN:
Category : Electronic books
Languages : en
Pages : 56
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Book Description
'This paper calculates the welfare cost of inflation by focusing on distortions and costs that inflation poses on households who use money for transactions to avoid alternative means of payment and on the losses inflicted on the holders of public debt arising from unexpected inflation. In doing so, we take into account of the role of financial innovation that reduces over time the dependence of households on money to make transactions. We find a sizable aggregate welfare cost of money holdings, but lower than those found in previous studies. The difference mainly comes from the incorporation of financial innovation in our studies. Across households, the old and middle-aged and the poor face higher costs from inflation much more than the young and the rich. Costs are expected to be lower for future generations due to financial innovation'--Non-technical summary.
Author: Luca Benati
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We revisit the estimation of the welfare costs of inflation originating from lack of liquidity satiation. We use data for the United States and several other developed countries. Our computations are heavily influenced by the recent experience of very low, even negative, short term rates observed in the countries we study. We obtain estimates that are close to those obtained by Lucas (2000), and an order of magnitude higher than those in Ireland (2009).
Author: Mr.Jose De Gregorio
Publisher: International Monetary Fund
ISBN: 145193128X
Category : Business & Economics
Languages : en
Pages : 34
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Book Description
This paper examines the welfare effects of mitigating the costs of inflation. In a simple model where money reduces transaction costs, a fall in the costs of inflation is equivalent to financial innovation. This can be caused by paying interest on deposits, indexing money, or “dollarizing.” Results indicate that financial innovation raises welfare in low inflation economies while reducing it in high inflation economies, due to the offsetting indirect effect of higher inflation to finance the budget.
Author: Clark A. Burdick
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 56
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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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Book Description
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: Robert Ware Hooper (Jr.)
Publisher:
ISBN:
Category :
Languages : en
Pages : 276
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Author: Peter Nathan Ireland
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 17
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"Post-1980 U.S. data trace out a stable long-run money demand relationship of Cagan's semi-log form between the M1-income ratio and the nominal interest rate, with an interest semi-elasticity below 2. Integrating under this money demand curve yields estimates of the welfare costs of modest departures from Friedman's zero nominal interest rate rule for the optimum quantity of money that are quite small. The results suggest that the Federal Reserve's current policy, which generates low but still positive rates of inflation, provides an adequate approximation in welfare terms to the alternative of moving all the way to the Friedman rule"--National Bureau of Economic Research web site
Author: Robert E. Lucas (Jr)
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 54
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Author: Mr.Jaromir Benes
Publisher: International Monetary Fund
ISBN: 1475505523
Category : Business & Economics
Languages : en
Pages : 71
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Book Description
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.
Author: Smithin, John Nicholas
Publisher: Calgary : Department of Economics, University of Calgary
ISBN:
Category :
Languages : en
Pages : 28
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