Inflation Welfare, and the Time-Costs of Transacting
AbstractThe costs of inflation are assessed using an endogenous growth macroeconomic model in which money reduces the time-costs of transacting. Inflation reduces growth in the model, which supports recent empirical evidence. Although simulations show time-costs to be small, inflation raises these costs and affects consumption, employment, and growth margins, implying greater welfare losses than generally found in the literature. The authors estimate welfare gains of 2 percent of GNP for reductions in inflation rates from 5 percent to zero when seignorage revenues are replaced with distortional taxes. Optimal inflation rates are negative.
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Bibliographic InfoPaper provided by Brock University, Department of Economics in its series Working Papers with number 1995-05.
Length: 48 pages
Date of creation: 1995
Date of revision:
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INFLATION; ECONOMIC MODELS; CONSUMPTION;
Other versions of this item:
- David R.F. Love & Jean-Francois Wen, 1999. "Inflation, Welfare, and the Time-Costs of Transacting," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 171-194, February.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
- H40 - Public Economics - - Publicly Provided Goods - - - General
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- Max Gillman & Michal Kejak & Akos Valentinyi, 2001.
"Inflation, Growth, and Credit Services,"
Development and Comp Systems
- Gillman, M. & Kejak, M. & Valentinyi, A., 1999. "Inflation, growth and credit services," Discussion Paper Series In Economics And Econometrics 9913, Economics Division, School of Social Sciences, University of Southampton.
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- Max Gillman & Michal Kejak & Akos Valentinyi, 2000. "Inflation, Growth, and Credit Services," CERGE-EI Working Papers wp154, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Gillman, Max & Otto, Glenn, 2003. "Money demand in a banking time economy," HWWA Discussion Papers 254, Hamburg Institute of International Economics (HWWA).
- Max Gillman & Michal Kejak, 2004.
"Inflation and Balanced-Path Growth with Alternative Payment Mechanisms,"
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0402, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Max Gillman & Michal Kejak, 2005. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," Economic Journal, Royal Economic Society, vol. 115(500), pages 247-270, 01.
- Gillman, Max & Kejak, Michal, 2005. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," Cardiff Economics Working Papers E2005/15, Cardiff University, Cardiff Business School, Economics Section.
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