The Welfare Cost of Inflation in Iran

Kazem Yavari and Mina Mehrnoosh
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Kazem Yavari: Corresponding Author-Associate Professor of Economics, TMU, and Vice President, Research, ITSR
Mina Mehrnoosh: Ph.D. Student, Al-Zahra University, and Director of Marketing and Market Research, ITSR

Iranian Economic Review (IER), 2005, vol. 10, issue 2, 111-117

Abstract: The purpose of this paper is to estimate the welfare cost of inflation in Iran. We first use the long-horizon regression approach developed by Fisher and Seater (1993) to obtain an estimate of the inflation rate elasticity of money demand and then the Baily’s consumer surplus approach to calculate the welfare cost function. The results show that reducing inflation rate from 40% to 0% increases the welfare of money holders by 0.3% of GDP. The welfare cost function helps the central bank to estimate the welfare effects of monetary policy.

Keywords: Integration; Co-integration; Long-run derivative; Interest elasticity. (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:10:y:2005:i:2:p:111

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