How uncertain are the welfare costs of inflation?

Hasan Bakhshi, Ben Martin and Anthony Yates ()
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Hasan Bakhshi: Bank of England

No 12, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: This paper quantifies some of the general equilibrium costs of inflation for the UK using a shopping-time model. It tests whether money balances tend to a finite number as nominal interest rates tend to zero, and explores how uncertainties about the shape of the money demand curve translate into uncertainties about these welfare costs of inflation. A key uncertainty is the existence of a satiation point for money balances. We show that without observations at nominal interest rates close to zero, the power of satiation tests can be low.

Date: 2002-08-29
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Working Paper: How uncertain are the welfare costs of inflation? (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2002:12

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