Welfare costs of inflation when interest-bearing deposits are disregarded: a calculation of the bias
Rubens Cysne () and
No 700, Economics Working Papers (Ensaios Economicos da EPGE) from FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil)
Most estimates of the welfare costs of in ation are devised considering only noninterest- bearing assets, ignoring that since the 80 s technological innovations and new regu- lations have increased the liquidity of interest-bearing deposits. We investigate the resulting bias. Su¢ cient and necessary conditions on its sign are presented, along with closed-form expressions for its magnitude. Two examples dealing with bidimen- sional bilogarithmic money demands show that disregarding interest-bearing monies may lead to a non-negligible overestimation of the welfare costs of in ation. An intu- itive explanation is that such assets may partially make up for the decreased demand of noninterest-bearing assets due to higher in ation.
New Economics Papers: this item is included in nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
http://bibliotecadigital.fgv.br/dspace/bitstream/1 ... st_bias_jan_2010.pdf (application/pdf)
Journal Article: Welfare costs of inflation when interest-bearing deposits are disregarded: A calculation of the bias (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:fgv:epgewp:700
Access Statistics for this paper
More papers in Economics Working Papers (Ensaios Economicos da EPGE) from FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) Contact information at EDIRC.
Series data maintained by Núcleo de Computação da EPGE ().