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Seigniorage and the Welfare Cost of Inflation in Colombia

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  • Martha López

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Abstract

We compute both seigniorage rate and welfare cost if inflation rate in Colombia using a Sidrausky -type model in which preferences are separable functions of the service flows of non-durable goods and money holdings. The set of the estimated parameters imply sizeable welfare cost of inflation and seigniorage rates. However, eventhough for low inflation rates seigniorage rate markedly increases with the rate of inflation, for very hight inflation rates it reaches an asymptote.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 151.

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Handle: RePEc:bdr:borrec:151

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  1. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  2. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1986. "A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty," NBER Working Papers 1981, National Bureau of Economic Research, Inc.
  3. Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model," American Economic Review, American Economic Association, vol. 79(4), pages 733-48, September.
  4. Hall, Alastair R., 2004. "Generalized Method of Moments," OUP Catalogue, Oxford University Press, number 9780198775201.
  5. 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.
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Cited by:
  1. Leonardo Villar Gómez, 2004. "Inflación Y Finanzas Públicas," BORRADORES DE ECONOMIA 002852, BANCO DE LA REPÚBLICA.
  2. Paulina Restrepo Echavarría, . "Disinflation Costs Under Inflation Targeting in Small Open Economy Economy," Borradores de Economia 328, Banco de la Republica de Colombia.
  3. Javier Gómez & Juan Manuel Julio, 2003. "Transmission Mechanism and Inflation Targeting: The Case of Colombia's Desinflation," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 18(2), pages 109-133, December.
  4. Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation Of Inflation Targeting In Colombia," BORRADORES DE ECONOMIA 003603, BANCO DE LA REPÚBLICA.
  5. Mushtaq, Siffat & Rashid, Abdul & Qayyum, Abdul, 2013. "On the Welfare Cost of Inflation: The Case of Pakistan," MPRA Paper 47549, University Library of Munich, Germany.
  6. Martha López, . "Algunos criterios para evaluar una meta de inflación de largo plazo," Borradores de Economia 386, Banco de la Republica de Colombia.
  7. Paulina Restrepo Echavarría, 2005. "Disinflation Costs Under Inflation Targeting In A Small Open Economy," BORRADORES DE ECONOMIA 002374, BANCO DE LA REPÚBLICA.

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