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Shoe-leather costs reconsidered

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Author Info
Jag Chadha
Andrew Haldane
Norbert Janssen

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Abstract

It has recently been suggested by Robert Lucas that `shoe-leather' costs of inflation may amount to as much as 1% of GNP in the United States. This paper assesses the UK evidence for the period 1970-1994. Similar estimates to those of Lucas are found using his original specification, but a preferred functional form using a semi-log interest elasticity of demand for money reveals a 0.22 % of GNP gain in perpetuity following a sustained fall in nominal interest rates from 6% to 2%.

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Paper provided by Bank of England in its series Bank of England working papers with number 86.

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Handle: RePEc:boe:boeewp:86

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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.:
  1. Francis Breedon & Paul Fisher, . "M0: Causes and Consequences," Bank of England working papers 20, Bank of England.
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  2. 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. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Chadha, Jagjit S & Haldane, Andrew G & Janssen, Norbert G J, 1998. "Shoe-Leather Costs Reconsidered," Economic Journal, Royal Economic Society, vol. 108(447), pages 363-82, March. [Downloadable!] (restricted)
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  5. Robert J. Shiller, 1996. "Why Do People Dislike Inflation?," Cowles Foundation Discussion Papers 1115, Cowles Foundation, Yale University. [Downloadable!]
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  6. 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. [Downloadable!] (restricted)
  7. 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.).
  8. 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. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Diego Rodriguez Palenzuela & Gonzalo Camba-Mendez & Juan Angel Garcia, 2003. "Relevant economic issues concerning the optimal rate of inflation," Working Paper Series 278, European Central Bank. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
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  3. Jag Chadha & Andrew Haldane & Norbert Janssen, . "Shoe-leather costs reconsidered," Bank of England working papers 86, Bank of England. [Downloadable!]
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  4. Björn Fischer & Petra Köhler & Franz Seitz, 2004. "The demand for euro area currencies," Working Paper Series 330, European Central Bank. [Downloadable!]
  5. 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. [Downloadable!]
  6. Livio Stracca, 2001. "Does liquidity matter? Properties of the synthetic divisia monetary aggregate in the Euro area," Working Paper Series 079, European Central Bank. [Downloadable!]
  7. Norbert Janssen, . "The demand for M0 in the United Kingdom reconsidered: some specification issues," Bank of England working papers 83, Bank of England. [Downloadable!]
  8. Alessandro Calza & Andrea Zaghini, 2008. "Nonlinearities in the dynamics of the euro area demand for M1," Temi di discussione (Economic working papers) 690, Bank of Italy, Economic Research Department. [Downloadable!]
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  9. Hasan Bakhshi & Ben Martin & Tony Yates, . "How uncertain are the welfare costs of inflation?," Bank of England working papers 152, Bank of England. [Downloadable!]
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  10. Miguel Casares, 2002. "Price setting and the steady-state effects of inflation," Working Paper Series 140, European Central Bank. [Downloadable!]
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  11. Alessandro Calza & Andrea Zaghini, 2006. "Non-linear dynamics in the euro area demand for M1," Working Paper Series 592, European Central Bank. [Downloadable!]
  12. Dumitru, Ionut, 2002. "Money Demand in Romania," MPRA Paper 10629, University Library of Munich, Germany. [Downloadable!]
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