The Welfare Costs of Inflation in a Micro-Founded Macroeconometric Model

Pablo Guerron

No 13, Working Paper Series from North Carolina State University, Department of Economics

Abstract: This paper computes the welfare costs of inflation in an estimated dynamic stochastic general equilibrium model of the U.S. economy. Both steady state and transitional welfare results are reported. I find that a 10 percent inflation entails a steady state welfare cost of 1.9 % of annual consumption. Taking into account trasitional effects, the cost drops to 1.2%. Under some circumstances, the transitional effects can erase most of the steady state welfare losses. The role of nominal frictions such as price/wage sluggishness as well as that of uncertainty are also addressed.

Keywords: Bayesian Estimation; DSGE; Inflation; Welfare; Transtional Dynamics (search for similar items in EconPapers)
JEL-codes: E31 E32 E37 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Note: First draft 2007-06
References: Add references at CitEc
Citations:

Downloads: (external link)
ftp://ftp.ncsu.edu/pub/ncsu/economics/RePEc/pdf/welcost.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Failed to connect to FTP server ftp.ncsu.edu: A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.

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:ncs:wpaper:013

Access Statistics for this paper

More papers in Working Paper Series from North Carolina State University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Theofanis Tsoulouhas ( this e-mail address is bad, please contact ).