The Inflation Tax In A Real Business Cycle Model
AbstractMoney is incorporated into a real business cycle model using a cash-in-advance constraint. The model is used to analyze whether the business cycle is different in high-inflation and low-inflation economies and to analyze the impact of variability in the growth rate of money. The welfare cost of the inflation tax is measured and the steady-state properties of high and low inflation economies are compared. The welfare cost of a sustained (10 percent) inflation is estimated to be between 0.11 percent and 0.4 percent of GNP. The features of the business cycle are the same in high and low inflation economies, but the steady-state paths may be quite different. Copyright 1989 by American Economic Association.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 155.
Length: 32 pages
Date of creation: 1988
Date of revision:
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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
business cycles ; inflation ; money ; economic models ; employment;
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