Conventional wisdom is that inflation makes people spend money faster, trying to get rid of it like a “hot potato,” and … this is a channel through which inflation affects velocity and welfare. Monetary theory with endoge- nous search intensity … seems ideal for studying this. However, in standard models, inflation is a tax that lowers the surplus from monetary …

We study the effects of inflation in models with various trading frictions. The framework is related to recent search … model, under posting the cost of inflation is similar to previous estimates, around 1% of consumption. Under bargaining, it … is considerably bigger, between 3% and 5%. Under price taking, the cost of inflation depends on parameters, but tends to …

We develop a theoretical framework to account for the observed instability of the link between inflation and fiscal … bank that has full control over inflation. When policy makers deviate from this Virtuous regime, agents conduct Bayesian … pessimistic about a prompt return to the Virtuous regime and inflation starts drifting in response to a fiscal imbalance. Shocks …

for output growth and inflation from 1992 to 2011. We find strong evidence of time variation in the pool's weights …

, we focus not only on real activity, which has received most attention to date, but also on inflation and its interaction … aspects concern a real activity decline that was unusually long but less unusually deep, and an inflation decline that was … unusually deep but brief; and (3) its real activity and inflation interactions were strongly positive, consistent with an …

and entry are both inefficient, and inflation implies a first-order welfare loss. Under price taking, the Friedman rule … solves the first inefficiency but not the second, and inflation can actually improve welfare. Under posting, the Friedman … rule implies first best, and inflation reduces welfare but the effect is second order. …

linking interest rates to forecasts of future inflation. Such rules have been found to give rise to aggregate fluctuations due … properties of interest-rate rules whereby the central bank responds to a measure of past inflation. The consensus view that has … inflation are likely to ensure global stability provided that the coefficient on lagged interest rates is greater than unity. …