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An Ordering Of Measures Of The Welfare Cost Of Inflation In Economies With Interest-Bearing Deposits

Listed author(s):
  • Cysne, Rubens Penha
  • Turchick, David

This paper builds on Lucas (2000) and on Cysne (2003) to derive and order six alternative measures of the welfare costs of inflation (five of which already existing in the literature) for any vector of opportunity costs. The ordering of the functions is carried out for economies with or without interestbearing deposits. We provide examples and closed-form solutions for the log-log money demand both in the unidimensional and in the multidimensional setting (when interest-bearing monies are present). An estimate of the maximum relative error a researcher can incur when using any particular measure is also provided.
(This abstract was borrowed from another version of this item.)

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Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 16 (2012)
Issue (Month): 05 (November)
Pages: 732-751

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Handle: RePEc:cup:macdyn:v:16:y:2012:i:05:p:732-751_00
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  1. Cysne, Rubens P, 2003. " Divisia Index, Inflation, and Welfare," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 221-238, April.
  2. Cysne, Rubens Penha, 2004. "A general-equilibrium closed-form solution to the welfare costs of inflation (Forthcoming, Revista Brasileira de Economia)," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 562, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Cysne, Rubens Penha, 2005. "A General-Equilibrium Closed-Form Solution to the Welfare Costs of Inflation," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 59(2), April.
  4. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  5. Simonsen, Mario Henrique & Cysne, Rubens Penha, 2001. "Welfare Costs of Inflation and Interest-Bearing Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 90-100, February.
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