Shoe-Leather Costs Reconsidered
AbstractR. E. Lucas (1995) has recently suggested that the 'shoe-leather' costs of inflation may amount to as much as 1 percent of GNP in the United States when moving to the Friedman optimum. The authors assess his thesis using empirical evidence for the United Kingdom over the period 1870-1994. They find support for Lucas's proposition--that interest rates should be specified in logs--as a description of money demand dynamics but not as a steady-state characterization. Although Lucas's estimates can be corroborated, a semilog interest rate specification implies smaller, though still tangible, welfare gain estimates: for example, 0.22 percent of GNP in perpetuity when moving from 6 percent to 2 percent nominal interest rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 108 (1998)
Issue (Month): 447 (March)
Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- C.W.J. Granger & Jeff Hallman, 1988. "The algebra of I (1)," Finance and Economics Discussion Series 45, Board of Governors of the Federal Reserve System (U.S.).
- Robert J. Shiller, 1996.
"Why Do People Dislike Inflation?,"
Cowles Foundation Discussion Papers
1115, Cowles Foundation for Research in Economics, Yale University.
- Breedon, F J & Fisher, P G, 1996.
"M0: Causes and Consequences,"
The Manchester School of Economic & Social Studies,
University of Manchester, vol. 64(4), pages 371-87, December.
- Jag Chadha & Andrew Haldane & Norbert Janssen, 1998.
"Shoe-leather costs reconsidered,"
Bank of England working papers
86, Bank of England.
- Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
- Tower, Edward, 1971. "More on the Welfare Cost of Inflationary Finance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(4), pages 850-60, November.
- Michael Dotsey & Peter Ireland, 1994.
"The welfare cost of inflation in general equilibrium,"
94-04, Federal Reserve Bank of Richmond.
- Dotsey, Michael & Ireland, Peter, 1996. "The welfare cost of inflation in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 29-47, February.
- Max Gillman, 1995. "Comparing Partial And General Equilibrium Estimates Of The Welfare Cost Of Inflation," Contemporary Economic Policy, Western Economic Association International, vol. 13(4), pages 60-71, October.
- Fischer, Stanley, 1981. "Towards an understanding of the costs of inflation: II," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 5-41, January.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Pemberton, James, 1999. "Social Security: National Policies with International Implications," Economic Journal, Royal Economic Society, vol. 109(457), pages 492-508, July.
- Miguel Casares, 2004.
"Price setting and the steady-state effects of inflation,"
Spanish Economic Review,
Springer, vol. 6(4), pages 267-289, December.
- Casares, Miguel, 2002. "Price setting and the steady-state effects of inflation," Working Paper Series 0140, European Central Bank.
- Norbert Janssen, 1998. "The demand for M0 in the United Kingdom reconsidered: some specification issues," Bank of England working papers 83, Bank of England.
- Chadha, Jagjit S & Haldane, Andrew G & Janssen, Norbert G J, 1998.
"Shoe-Leather Costs Reconsidered,"
Royal Economic Society, vol. 108(447), pages 363-82, March.
- Buiter, Willem H & Panigirtzoglou, Nikolaos, 1999.
"Liquidity Traps: How to Avoid Them and How to Escape Them,"
CEPR Discussion Papers
2203, C.E.P.R. Discussion Papers.
- Willem H Buiter & Nikolaos Panigirtzoglou, 2000. "Liquidity traps: how to avoid them and how to escape them," Bank of England working papers 111, Bank of England.
- Willem H. Buiter & Nikolaos Panigirtzoglou, 1999. "Liquidity Traps: How to Avoid Them and How to Escape Them," NBER Working Papers 7245, National Bureau of Economic Research, Inc.
- Calza, Alessandro & Zaghini, Andrea, 2006. "Non-linear dynamics in the euro area demand for M1," Working Paper Series 0592, European Central Bank.
- Stracca, Livio, 2001. "Does liquidity matter? Properties of a synthetic divisia monetary aggregate in the euro area," Working Paper Series 0079, European Central Bank.
- Miguel Casares, 2007. "The New Keynesian Model and the Euro Area Business Cycle," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(2), pages 209-244, 04.
- Buiter, Willem H., 2003.
"Overcoming the zero bound on nominal interest rates with negative interest on currency : Gesell's solution,"
Open Access publications from London School of Economics and Political Science
http://eprints.lse.ac.uk/, London School of Economics and Political Science.
- Willem H. Buiter & Nikolaos Panigirtzoglou, 2003. "Overcoming the zero bound on nominal interest rates with negative interest on currency: gesell's solution," Economic Journal, Royal Economic Society, vol. 113(490), pages 723-746, October.
- Calza, Alessandro & Zaghini, Andrea, 2010.
"Sectoral money demand and the great disinflation in the US,"
Working Paper Series
1218, European Central Bank.
- Alessandro Calza & Andrea Zaghini, 2011. "Sectoral money demand and the great disinflation in the US," Temi di discussione (Economic working papers) 785, Bank of Italy, Economic Research and International Relations Area.
- Buiter, Willem H. & Panigirtzoglou, Nikolaos, 2005. "Overcoming the zero bound : Gesell vs. Eisler. Discussion of Mitsuhiro Fukao's "The effects of 'Gesell' (currency) taxes in promoting Japan's economic recovery"," Open Access publications from London School of Economics and Political Science http://eprints.lse.ac.uk/, London School of Economics and Political Science.
- Rodriguez-Palenzuela, Diego & Camba-Méndez, Gonzalo & García, Juan Angel, 2003. "Relevant economic issues concerning the optimal rate of inflation," Working Paper Series 0278, European Central Bank.
- Seitz, Franz & von Landesberger, Julian, 2010. "Household money holdings in the euro area: An explorative investigation," Working Paper Series 1238, European Central Bank.
- Hasan Bakhshi & Ben Martin & Tony Yates, 2002.
"How uncertain are the welfare costs of inflation?,"
Bank of England working papers
152, Bank of England.
- Alexander L. Wolman, 1997. "Zero inflation and the Friedman rule: a welfare comparison," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-21.
- Fischer, Björn & Köhler, Petra & Seitz, Franz, 2004. "The demand for euro area currencies: past, present and future," Working Paper Series 0330, European Central Bank.
- Dumitru, Ionut, 2002. "Money Demand in Romania," MPRA Paper 10629, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.