 The Costs of Inflation in Australia and New ZealandNew Zealand Economic Papers, 2006, vol. 40, issue 2, 127-146 Abstract: This paper evaluates the costs of inflation in Australia and New Zealand using a compensated measure calculated by calibrating a general equilibrium search model in the vein of Lagos and Wright (2005). We look at how inflation affects the intensive margin (the quantity traded in each match) by examining the impact of various pricing protocols. We also look at how inflation affects the extensive margin (the number of trades) by making the market composition between buyers and sellers endogenous. We obtain much larger costs of inflation than existing studies, but smaller costs than similar studies conducted on the US economy. Depending on the version of the model, the costs of 10% inflation for a $50,000 worker ranges from $250 to $2200 per year in Australia, and from $200 to $1700 in New Zealand, that is between 0.5% and 4.4% of GDP and between 0.4% and 3.4% of GDP respectively. Finally it is calculated that Australia could gain up to 1.6% of GDP per annum - 1.2% for New Zealand - by implementing the Friedman rule. Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:nzecpp:v:40:y:2006:i:2:p:127-146 Ordering information: This journal article can be ordered from DOI: 10.1080/00779954.2006.9558558 Access Statistics for this article New Zealand Economic Papers is currently edited by Dennis Wesselbaum More articles in New Zealand Economic Papers from Taylor & Francis Journals |
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