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This paper extends recent findings in the search-theoretic literature on monetary exchange regarding the welfare costs of inflation. We present first estimates of the welfare cost of inflation using the "welfare triangle" methodology of Bailey (1958) and Lucas (2000). We then derive a money...
Persistent link: https://www.econbiz.de/10005389954
This paper investigates the welfare and output effects of inflation in a monetary economy with search frictions and sticky prices. Agents trade in both a centralized Walrasian market and a decentralized search market. Trade has two dimensions: the frequency of trades (how often agents trade) and...
Persistent link: https://www.econbiz.de/10005069481
This paper uses a search model of monetary exchange to provide new insights for evaluating the welfare costs of inflation. We first show that the search model of money can rationalize the estimates of the welfare cost of inflation based on the "welfare triangle" methodology of Bailey (1956) and...
Persistent link: https://www.econbiz.de/10005736417
We investigate the welfare effects of inflation in economies with search frictions and menu costs. We first analyze an economy where there is no transaction demand for money balances: Money is a mere unit of account. We determine a condition under which strictly positive inflation is desirable....
Persistent link: https://www.econbiz.de/10005143623
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This paper investigates the welfare effects of inflation in economies with search frictions and menu costs. We first analyze an economy where there is no transaction demand for money balances: Money is a mere unit of account. We determine a condition under which price stability is optimal and a...
Persistent link: https://www.econbiz.de/10014223072
Persistent link: https://www.econbiz.de/10003636050