Welfare costs of inflation: the case for interest-bearing money and empirical estimates for Brazil

Mario Henrique Simonsen and Rubens Cysne

No 245, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: We provide in this paper a closed fonn for the Welfare Cost of Inflation which we prove to be closer than Bailey's expression to the correct solution of the corresponding non-separable differential equation. Next. we extend this approach to ao economy with interest-bearing money, once again presenting a better appoximation than the one given by Bailey's approach. Fmally, empirical estimates for Brazil are presented.

Date: 1994-07
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