Advanced Search
MyIDEAS: Login to save this article or follow this journal

The welfare cost of inflation: a critique of Bailey and Lucas

Contents:

Author Info

  • Alvin L. Marty
Registered author(s):

    Abstract

    Estimating the welfare gains from ending inflation requires taking a stand on the shape of the money demand function. A form of the money demand function that seems to describe U.S. experience - known in technical jargon as the double log form - seems to work well in countries and times where inflation was moderate. In this article, Alvin Marty argues that the double log form would not likely work well in extreme cases, where policy was set to achieve Milton Friedman's optimal money stock, or at the other extreme, hyperinflation. The author concludes that this simple functional form should not be used to calculate the welfare gains associated with implementing the optimal policy.

    Download Info

    If 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.
    File URL: http://research.stlouisfed.org/publications/review/99/01/9901am.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Federal Reserve Bank of St. Louis in its journal Review.

    Volume (Year): (1999)
    Issue (Month): Jan ()
    Pages: 41-46

    as in new window
    Handle: RePEc:fip:fedlrv:y:1999:i:jan:p:41-46:n:1

    Contact details of provider:
    Postal: P.O. Box 442, St. Louis, MO 63166
    Fax: (314)444-8753
    Web page: http://www.stlouisfed.org/
    More information through EDIRC

    Order Information:
    Email:
    Web: http://www.stls.frb.org/research/order/pubform.html

    Related research

    Keywords: Money supply ; Inflation (Finance);

    References

    References listed on IDEAS
    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.:
    as in new window
    1. King, Robert G. & Wolman, Alexander L., 2013. "Inflation Targeting in a St. Louis Model of the 21st Century," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 543-574.
    2. 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.
    3. Robert E. Lucas, Jr., 1994. "On the welfare cost of inflation," Working Papers in Applied Economic Theory 94-07, Federal Reserve Bank of San Francisco.
    4. Auernheimer, Leonardo, 1974. "The Honest Government's Guide to the Revenue from the Creation of Money," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 598-606, May/June.
    5. Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280.
    6. Marty, Alvin L., 1976. "A note on the welfare cost of money creation," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 121-124, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Cysne, Rubens Penha, 2002. "A note on the integrability of partial-equilibrium measures of the welfare costs of inflation," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2357-2363.

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. Advanced Monetary Theory and Policy (ECON 447)

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:y:1999:i:jan:p:41-46:n:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).

    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.