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Welfare costs of inflation: the case for interest-bearing money and empirical estimates for Brazil

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  • Simonsen, Mario Henrique
  • Cysne, Rubens Penha

Abstract

We provide in this paper a closed fonn for the Welfare Cost of Inflation which we prove to be closer than Bailey's expression to the correct solution of the corresponding non-separable differential equation. Next. we extend this approach to ao economy with interest-bearing money, once again presenting a better appoximation than the one given by Bailey's approach. Fmally, empirical estimates for Brazil are presented.

Suggested Citation

  • Simonsen, Mario Henrique & Cysne, Rubens Penha, 1994. "Welfare costs of inflation: the case for interest-bearing money and empirical estimates for Brazil," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 245, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:245
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    Cited by:

    1. repec:fgv:epgrbe:v:66:n:2:a:1 is not listed on IDEAS
    2. Araujo, Aloisio & Leon, Marcia & Santos, Rafael, 2012. "Speculative attacks, openness and crises," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 66(2), June.
    3. Garcia, Marcio G. P., 1996. "Avoiding some costs of inflation and crawling toward hyperinflation: The case of the Brazilian domestic currency substitute," Journal of Development Economics, Elsevier, vol. 51(1), pages 139-159, October.
    4. João Ricardo Faria & Francisco Galrão Carneiro, 2001. "Does High Inflation Affect Growth in the Long and Short Run?," Journal of Applied Economics, Taylor & Francis Journals, vol. 4(1), pages 89-105, May.

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