Sectoral money demand and the great disinflation in the US

Alessandro Calza and Andrea Zaghini

No 1218, Working Paper Series from European Central Bank

Abstract: Estimates of the welfare costs of inflation based on Bailey (1956) are typically computed using aggregate money demand models. Yet, the behavior of money demand may vary across sectors. Thus, the impact on welfare of inflation regime shifts may differ between households and firms. We specifically investigate the sectoral welfare implications of the shift from the Great Inflation to the present regime of low and stable inflation. For this purpose, we estimate different functional specifications of money demand for US households and non-financial firms using flow-of-fund data covering four decades. We find that the benefits were significant for both sectors. JEL Classification: E31, E41

Keywords: demand for money; welfare cost of ination; ow of funds data (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: 338639
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Citations: View citations in EconPapers (6)

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Working Paper: Sectoral money demand and the great disinflation in the US (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101218

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