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Comparing Partial And General Equilibrium Estimates Of The Welfare Cost Of Inflation

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  • Max Gillman

Abstract

Reserve banks worldwide have been moving towards zero inflation policies. Confusion clouds the welfare cost of maintaining such inflation policies despite the best attempts at clarification. Monetary theory research has shifted from partial to general equilibrium economies. This shift has left the partial equilibrium estimates of the welfare cost of inflation below most of the general equilibrium estimates. Put on a comparable basis, partial equilibrium estimates compare more closely with the general equilibrium estimates. Furthermore, evidence suggests that integration under the money demand function appears applicable in general equilibrium economies. Finally, the estimates depend on the elasticities of money demand and the underlying structural parameters. Copyright 1995 Western Economic Association International.

Suggested Citation

  • Max Gillman, 1995. "Comparing Partial And General Equilibrium Estimates Of The Welfare Cost Of Inflation," Contemporary Economic Policy, Western Economic Association International, vol. 13(4), pages 60-71, October.
  • Handle: RePEc:bla:coecpo:v:13:y:1995:i:4:p:60-71
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.1995.tb00732.x
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    References listed on IDEAS

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    1. Berger, Allen N & Udell, Gregory F, 1992. "Some Evidence on the Empirical Significance of Credit Rationing," Journal of Political Economy, University of Chicago Press, pages 1047-1077.
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    Cited by:

    1. Stephen M. Miller & Luis F. Martins & Rangan Gupta, 2014. "A Time-Varying Approach of the US Welfare Cost of Inflation," Working Papers 201419, University of Pretoria, Department of Economics.
    2. Calza Alessandro & Zaghini Andrea, 2011. "Welfare Costs of Inflation and the Circulation of U.S. Currency Abroad," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-21.
    3. Siffat Mushtaq & Abdul Rashid & Abdul Qayyum, 2012. "On the Welfare Cost of Inflation: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, pages 61-96.
    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 363-382, March.
    5. Alessandro Calza & Andrea Zaghini, 2015. "Shoe-leather costs in the euro area and the foreign demand for euro banknotes," Temi di discussione (Economic working papers) 1039, Bank of Italy, Economic Research and International Relations Area.
    6. repec:ipg:wpaper:2014-474 is not listed on IDEAS
    7. Calza, Alessandro & Zaghini, Andrea, 2011. "Welfare costs of inflation and the circulation of US currency abroad," Working Paper Series 1326, European Central Bank.
    8. 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, January.
    9. Cipollone, Piero & Rosolia, Alfonso, 2011. "Schooling and Youth Mortality: Learning from a Mass Military Exemption," CEPR Discussion Papers 8431, C.E.P.R. Discussion Papers.
    10. Jeffrey Rogers Hummel, 2007. "Death and Taxes, Including Inflation: the Public versus Economists," Econ Journal Watch, Econ Journal Watch, pages 46-59.
    11. Calza Alessandro & Zaghini Andrea, 2011. "Welfare Costs of Inflation and the Circulation of U.S. Currency Abroad," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-21.
    12. Alessandro Calza & Andrea Zaghini, 2016. "Shoe-Leather Costs in the Euro Area and the Foreign Demand for Euro Banknotes," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 231-246, March.
    13. Markus Kirchner & Jacopo Cimadomo & Sebastian Hauptmeier, 2010. "Transmission of Government Spending Shocks in the Euro Area: Time Variation and Driving Forces," Tinbergen Institute Discussion Papers 10-021/2, Tinbergen Institute.
    14. Carlo Menon, 2009. "Stars and Comets: An Exploration of the Patent Universe," SERC Discussion Papers 0037, Spatial Economics Research Centre, LSE.

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