On the Instability of Long‐Run Money Demand and the Welfare Cost of Inflation in the United States

Matteo Mogliani and Giovanni Urga

Journal of Money, Credit and Banking, 2018, vol. 50, issue 7, 1645-1660

Abstract: We evaluate the policy implications of measuring the welfare cost of inflation accounting for instabilities in the long‐run money demand for the United States over the period 1900–2013. We extend the analysis and reassess the results reported in Lucas (2000) and Ireland (2009), also considering the recent theoretical contributions of Lucas and Nicolini (2015) and Berentsen, Huber, and Marchesiani (2015). Breaks in the long‐run money demand give rise to regime‐dependent welfare cost estimates. We find that the welfare cost is about 0.1% of annual income over 1976–2013, as compared to 0.8% over 1945–75. Overall, these values are substantially lower than those reported in the literature.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12480

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:50:y:2018:i:7:p:1645-1660

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().