Welfare costs of inflation when interest-bearing deposits are disregarded: a calculation of the bias

Autor:	David Turchick, Rubens Penha Cysne
Přispěvatelé:	Escolas::EPGE, FGV
Jazyk:	angličtina
Rok vydání:	2010
Předmět:	Inflation Economics and Econometrics Money demand Control and Optimization Divisia index Inflação Applied Mathematics media_common.quotation_subject Welfare Monetary economics Economia Market liquidity Interest bearing Interest-bearing monies Economics media_common
Zdroj:	Repositório Institucional do FGV (FGV Repositório Digital) Fundação Getulio Vargas (FGV) instacron:FGV
Popis:	Most estimates of the welfare costs of inflation are devised considering only noninterest-bearing assets, ignoring that since the 1980s technological innovations and new regulations have increased the liquidity of interest-bearing deposits. We investigate the resulting bias. Sufficient and necessary conditions on its sign are presented, along with closed-form expressions for its magnitude. Two examples dealing with bidimensional bilogarithmic money demands show that disregarding interest-bearing monies may lead to a non-negligible overestimation of the welfare costs of inflation. An intuitive explanation is that such assets may partially make up for the decreased demand of noninterest-bearing assets due to higher inflation.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::bead130f8fac523738085e856dc4da14 Zobrazit plný text záznamu