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Information technology and the welfare cost of anticipated inflation

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  • Thomas Cone

Abstract

I numerically study inflation’s welfare cost in a model in which there are two ways of mediating trade: money and information technology (IT), a probabilistically updated public record of agents’ histories. I find that a higher updating probability either brings the incentive-constrained output closer to its unconstrained value, or triggers the abandonment of money. In the first case the higher updating probability induces both higher inflation and a lower welfare cost of inflation. In the second case, welfare is higher than with the lower updating probability, but inflation’s welfare cost measured in a standard way is also higher. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Thomas Cone, 2007. "Information technology and the welfare cost of anticipated inflation," Computational Economics, Springer;Society for Computational Economics, vol. 30(1), pages 1-18, August.
    • Handle: RePEc:kap:compec:v:30:y:2007:i:1:p:1-18
    DOI: 10.1007/s10614-006-9076-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Money; Inflation; Information technology; Welfare cost of inflation; E0; E52;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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