Inflation, Welfare, and the Time-Costs of Transacting
AbstractThe costs of inflation are assessed using an endogenous growth macroeconomic model in which money reduces the time-costs of transacting. Inflation reduces growth in the model, which supports recent empirical evidence. Although simulations show time-costs to be small, inflation raises these costs and affects consumption, employment, and growth margins, implying greater welfare losses than generally found in the literature. The authors estimate welfare gains of 2 percent of GNP for reductions in inflation rates from 5 percent to zero when seignorage revenues are replaced with distortional taxes. Optimal inflation rates are negative.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 32 (1999)
Issue (Month): 1 (February)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Other versions of this item:
- Love, D.R.F. & Wen, J.F., 1995. "Inflation Welfare, and the Time-Costs of Transacting," Working Papers 1995-05, Brock University, Department of Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- D6 - Microeconomics - - Welfare Economics
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- Gillman, Max & Otto, Glenn, 2003. "Money demand in a banking time economy," HWWA Discussion Papers 254, Hamburg Institute of International Economics (HWWA).
- Gillman, M. & Kejak, M. & Valentinyi, A., 1999.
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9913, Economics Division, School of Social Sciences, University of Southampton.
- Max Gillman & Michal Kejak & Akos Valentinyi, 2001. "Inflation, Growth, and Credit Services," Development and Comp Systems 0012007, EconWPA.
- Max Gillman & Michal Kejak & Akos Valentinyi, 2000. "Inflation, Growth, and Credit Services," CERGE-EI Working Papers wp154, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Gillman, Max & Kejak, Michal & Valentinyi, Akos, 1999. "Inflation, Growth, and Credit Services," Transition Economics Series 13, Institute for Advanced Studies.
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