Shoe-leather costs in the euro area and the foreign demand for euro banknotes

Alessandro Calza () and Andrea Zaghini
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Alessandro Calza: ECB

No 1039, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We estimate the shoe leather costs of inflation in the euro area by using monetary data adjusted for holdings of euro banknotes abroad. While we find evidence of marginally negative shoe leather costs for very low nominal interest rates, our estimates suggest that these costs are non-negligible even for relatively moderate levels of anticipated inflation. We conclude that, despite the increased circulation of euro banknotes abroad, inflation tax is still predominantly borne by domestic agents in the euro area, with transfers of resources from abroad remaining small.

Keywords: money demand; welfare cost of inflation; currency abroad; euro banknotes (search for similar items in EconPapers)
JEL-codes: C22 E41 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Shoe-Leather Costs in the Euro Area and the Foreign Demand for Euro Banknotes (2016)
Working Paper: Shoe-leather costs in the euro area and the foreign demand for euro banknotes (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1039_15

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