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Measuring the Welfare Cost of Inflation in Zimbabwe

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  • Makochekanwa, Albert

Abstract

The study estimates the long-run equilibrium relationship between money balance as a ratio of income and treasury bill rate for the Zimbabwean economy. These estimates are done for two periods, the entire period (using quarterly data) of 1980:01 to 2005:04 and the hyperinflationary period (using monthly data) of 1999:01 to 2005:12. These estimates are in turn used to obtain estimates for the welfare cost of inflation. Using the Johansen technique, the research estimates a log-log specification and a semi-log model of the above relationship for the two periods. Estimates suggest that the welfare cost of inflation for Zimbabwe ranges between 0.9% and 23.4% of GDP for a band of 10 to 300% of inflation in the case of estimations done for the entire period. Welfare cost estimates for the hyperinflationary period are 0.4% and 27.6% of GDP, respectively.

Suggested Citation

  • Makochekanwa, Albert, 2008. "Measuring the Welfare Cost of Inflation in Zimbabwe," MPRA Paper 22396, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:22396
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    File URL: https://mpra.ub.uni-muenchen.de/22396/1/MPRA_paper_22396.pdf
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    References listed on IDEAS

    as
    1. Serletis, Apostolos & Yavari, Kazem, 2004. "The welfare cost of inflation in Canada and the United States," Economics Letters, Elsevier, vol. 84(2), pages 199-204, August.
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    More about this item

    Keywords

    Cointegration; Interest elasticity; Money Demand; Welfare Cost of Inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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