Consumer preferences, the demand for Divisia money, and the welfare costs of inflation

Apostolos Serletis and Libo Xu

Journal of Macroeconomics, 2023, vol. 75, issue C

Abstract: This paper uses neoclassical demand theory to calculate the welfare costs of inflation. It considers the demand interactions between money, consumption goods, and leisure, relaxes the assumption of fixed consumer preferences, and addresses the inter-related problems of estimation of money demand functions, instability of money demand relations, and monetary aggregation. It makes full use of the relevant economic theory and econometrics and generates inference in terms of long-run welfare costs of inflation that is internally consistent with the data and models used.

Keywords: Divisia aggregates; Flexible functional forms; Normalized quadratic system (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 E41 E42 E52 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:75:y:2023:i:c:s0164070422000830

DOI: 10.1016/j.jmacro.2022.103490

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