Shoe-leather costs in the euro area and the foreign demand for euro banknotes

Alessandro Calza and Andrea Zaghini

No 1824, Working Paper Series from European Central Bank

Abstract: We estimate the shoe-leather costs of inflation in the euro area using monetary data adjusted for holdings of euro banknotes abroad. While we find evidence of marginally negative shoe-leather costs for very low levels of the nominal interest rate, our estimates suggest that the shoe-leather costs are non-negligible even for relatively moderate levels of anticipated inflation. We conclude that, despite the increased circulation of euro banknotes abroad, in the euro area the inflation tax is still predominantly borne by domestic agents, with transfers of resources from abroad remaining small. JEL Classification: E41, C22

Keywords: currency abroad; euro; money demand; welfare cost of inflation (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Note: 338639
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Shoe-Leather Costs in the Euro Area and the Foreign Demand for Euro Banknotes (2016)
Working Paper: Shoe-leather costs in the euro area and the foreign demand for euro banknotes (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20151824

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