Financial Exclusion and Inflation Costs

Diogo Baerlocher

No 2023-01, Working Papers from University of South Florida, Department of Economics

Abstract: This paper constructs two models of financial exclusion to assess the welfare costs of inflation. In the first, inflation costs are measured within a classical endowment economy. The second includes a production sector and costly credit. Both models are calibrated to account for inflation costs in a high-inflation economy (developing country) and in a low-inflation economy (developed economy). In an endowment economy, when inflation is reduced from 1.5% to zero in a developed economy, the welfare costs for agents with (without) financial access are 0.36% (1.1%) consumption equivalent variation (CEV). In a model with costly credit, the welfare costs for agents with (without) financial access are 0.7% (1.36%) CEV. For developing countries, when inflation is reduced from 6.2% to zero, the welfare costs for agents with (without) financial access are 1.3% (5%) in an endowment economy. In the costly-credit model, the welfare costs for agents with (without) financial access are 0.44% (6%) CEV. The main finding is that there is a substantial asymmetry in welfare costs between individuals with and without access to financial services, especially in developing countries.

Keywords: Financial Exclusion; Inflation Costs; Costly Credit (search for similar items in EconPapers)
JEL-codes: D53 E31 E51 G23 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ban, nep-dge, nep-fdg, nep-fle, nep-ger and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.usf.edu/arts-sciences/departments/econ ... s/wpaper/2023-01.pdf (application/pdf)

Related works:
Journal Article: Financial exclusion and inflation costs (2024)
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:usf:wpaper:2023-01

Access Statistics for this paper

More papers in Working Papers from University of South Florida, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Diogo Baerlocher ().