Welfare cost of inflation, when credit card transaction services are included among monetary services

William Barnett and Park Sohee ()
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Park Sohee: Department of Economics, University of Kansas, Valparaiso, IN 46383, USA

Studies in Nonlinear Dynamics & Econometrics, 2024, vol. 28, issue 3, 463-479

Abstract: We investigate the welfare cost of anticipated inflation, when the volume of credit card transactions is included in measured monetary service flows. We use the credit-card-augmented Divisia monetary aggregates in a nonlinear dynamic stochastic general equilibrium (DSGE) New Keynesian model and calculate the welfare costs of inflation. The welfare costs of inflation with credit card services included are greater than without them in the New Keynesian DSGE model. Because of the complexity of the model’s dynamical structure, we are not aware of a simple explanation for the increased welfare sensitivity to inflation.

Keywords: credit-card-augmented Divisia; Divisia; inflation; monetary aggregates; nonlinear dynamics; welfare cost (search for similar items in EconPapers)
JEL-codes: E31 E41 E51 E52 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Welfare Cost of Inflation, when Credit Card Transaction Services Are Included among Monetary Services (2023)
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DOI: 10.1515/snde-2022-0092

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