The welfare cost of inflation in Canada and the United States

Serletis, Apostolos; Yavari, Kamal

doi:10.1016/j.econlet.2004.02.002

Cited by 30 publications

(45 citation statements)

References 4 publications

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“…Quanto à forma funcional, existem evidências empíricas favoráveis à forma semi-log para a economia americana, conforme mostra Ireland (2009), e à forma log-log para dados brasileiros anteriores ao Plano Real, segundo Simonsen & Cysne (2007), mesmo a literatura sugerindo que a forma log-log seria robusta para patamares inflacionários mais baixos, ver Serletis & Yavari (2004). Entretanto, antes de mostrar e interpretar os resultados, a próxima subseção apresenta os dados utilizados nos exercícios empíricos.…”

Section: Modelo De Regressão Cointegradaunclassified

“…Nesse sentido, considerações decorrentes das especificações das formas semi-log e log-log foram propostas na literatura empírica, sendo que a estrutura semi-log descreve bem ambientes de elevada inflação, enquanto a log-log seria robusta para estruturas de baixa inflação, ver Yavari & Serletis (2011). Conforme Serletis & Yavari (2004), a forma funcional log-log ajusta-se melhor a dados que não incluem regiões de hiperinflação ou taxas de juros quase nulas. Lucas (2000) quantificou as especificações de Cagan e de Meltzer para um período longo de tempo, correspondendo aos dados anuais para o intervalo entre 1900 − 1994, para o qual o autor concluiu pela superioridade da forma log-log.…”

Section: Introductionunclassified

“…Serletis & Yavari (2004) destacam que o conhecimento acerca da elasticidade-juros da demanda de moeda é crucial na avaliação dos custos de bem-estar da inflação.…”

Section: Introductionunclassified

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Custos de bem-estar da inflação no Brasil pós-real

Caetano¹,

Júnior²,

Júnior³

2014

Econ. Apl.

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ResumoEste trabalho investiga o comportamento da demanda por moeda no Brasil de forma a derivar os custos de bem-estar da inflação pós-Plano Real. Os resultados, para um período de dezessete anos, corroboram a forma funcional log-log que mostra significativos ganhos de bem-estar relativos aos custos sociais anteriores ao Plano Real. Para uma inflação de aproximadamente 4, 5% a.a., tem-se custo de bem-estar entre 0, 15 e 0, 20% da renda. Conclui-se, como esperado, que o país deve direcionar suas políticas para alcançar tanto um patamar de inflação menor quanto para obter um nível de taxa de juros real de estado estacionário de países desenvolvidos.Palavras-chave: Demanda por Moeda; Custos de Bem-Estar da Inflação; Política Monetária. AbstractThis work investigates the behavior of money demand in Brazil in order to derive the welfare costs of inflation after the Real Plan. The results, for a period of about seventeen years, corroborated the log-log specification that shows significant gains in welfare cost of inflation. Still, for an inflation of around 4.5% per year, there is a welfare cost between 0, 15 and 0, 20% of income. But, we suggest that the country directs its policies to achieve a much lower level of inflation and to a level of steady state real interest rate of developed countries.

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Section: Modelo De Regressão Cointegradaunclassified

Section: Introductionunclassified

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Custos de bem-estar da inflação no Brasil pós-real

Caetano¹,

Júnior²,

Júnior³

2014

Econ. Apl.

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“…Estimating a longhorizon regression, they find that interest elasticity is 0.26. Using the same approaches of calculating welfare cost of inflation as in Serletis and Yavari (2003), they show that lowering the interest rate from 14% to 3% yield a benefit of about 0.4% of income. Same analysis was extended in Serletis and Yavari (2007) to calculate direct cost of inflation for seven European countries, Ireland, Australia, Italy, Netherlands, France, Germany, and Belgium.…”

Section: The Welfare Cost Of Inflationmentioning

confidence: 98%

On the Welfare Cost of Inflation: The Case of Pakistan

Mushtaq¹,

Rashid

Qayyum

2022

pdr

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In this paper, we quantify welfare costs of inflation for Pakistan for the period 1960-2007 using semi-log and double-log money demand functions. We find that the welfare gain of moving from positive inflation to zero inflation is approximately the same under both money demand specifications but the behaviour of the two models is fairly different towards low interest rates. Moving from zero inflation to zero nominal interest rate has a substantial gain under double-log form compared to the semi-log function. The compensating variation approach for the semi-log model gives higher welfare loss figures compared to Bailey’s approach. However, the two approaches yield approximately the same welfare cost of inflation for the double-log specification. Keywords: Monetary Policy, Inflation, Interest Rate, Welfare Costs, Money Demand Functions

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“…Thus, at low interest rates, both functions behave very differently. Integration (5) yields inflation cost: Lucas (2000), Ireland (2007), Serletis and Yavari (2004), and own calculations.…”

Section: Empirical Evidencementioning

confidence: 99%

The Welfare Effects of Inflation: A Cost–Benefit Perspective

Tödter¹,

Manzke

2009

Handbook of Research on Cost–Benefit Analysis

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Abstract:This paper reviews theory and evidence of the welfare effects of inflation from a costbenefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More recently, interactions of inflation and taxation came into focus. Growth effects of inflation as well as welfare effects of unanticipated inflation and of inflation uncertainty are also addressed. To assess the policy question whether inflation should be reduced or eliminated, the costs of disinflation play a role. Finally, the trade-off between the benefits of reducing inflation and the costs of disinflation is discussed and an overall assessment of the net welfare effects of achieving price stability is provided. Keywords:Inflation, price stability, welfare costs and benefits, distortions, money demand, consumption allocation, tax-inflation interaction, disinflation, sacrifice ratio. JEL-Classification: D61, E31, E41, E21, H21 Non technical summaryInflation creates and amplifies distortions in many areas of economic activity and influences virtually all decisions of economic agents. This paper provides a theoretical and empirical overview of the welfare effects of inflation from a cost-benefit perspective. Cost-benefit analysis is a technique of applied welfare analysis which is widely used to judge the social desirability of an economic project or a policy change.Understanding the welfare effects of achieving and keeping low inflation requires a combination of the traditional subjects of macroeconomics and public finance.Economic research has uncovered a number of channels through which inflation affects output and welfare. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More recently, interactions of inflation and taxation came into focus.In this paper basic models and selected empirical results of the welfare effects of inflation are discussed. Inflation induced distortions of money demand and tax-inflation distortions of intertemporal saving and consumption allocation are reviewed, followed by brief discussions of the effects of inflation on growth, the welfare effects of unanticipated inflation and of inflation uncertainty. To assess the policy question whether inflation should be reduced or eliminated, the costs of disinflation play a role.Finally, the trade-off between the benefits of reducing inflation and the costs of disinflation is discussed. In the concluding overall assessment of the net welfare effects of achieving price stability the benefits of price stability appear to be large and permanent while the costs of disinflation are small in comparison and temporary. In combination with certain behavioral patterns (saving rates) and institutional facts (tax rules), even low inflation can generate high welfare losses. Nicht technische Zusammenfassung

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The welfare cost of inflation in Canada and the United States

Cited by 30 publications

References 4 publications

Custos de bem-estar da inflação no Brasil pós-real

Custos de bem-estar da inflação no Brasil pós-real

On the Welfare Cost of Inflation: The Case of Pakistan

The Welfare Effects of Inflation: A Cost–Benefit Perspective

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