Information technology and the welfare cost of anticipated inflation

Thomas Cone ()

Computational Economics, 2007, vol. 30, issue 1, 18 pages

Abstract: I numerically study inflation’s welfare cost in a model in which there are two ways of mediating trade: money and information technology (IT), a probabilistically updated public record of agents’ histories. I find that a higher updating probability either brings the incentive-constrained output closer to its unconstrained value, or triggers the abandonment of money. In the first case the higher updating probability induces both higher inflation and a lower welfare cost of inflation. In the second case, welfare is higher than with the lower updating probability, but inflation’s welfare cost measured in a standard way is also higher. Copyright Springer Science+Business Media, LLC 2007

Keywords: Money; Inflation; Information technology; Welfare cost of inflation; E0; E52 (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1007/s10614-006-9076-9

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