Welfare costs of inflation when interest-bearing deposits are disregarded: a calculation of the bias
Most estimates of the welfare costs of in ation are devised considering only noninterest- bearing assets, ignoring that since the 80s technological innovations and new regulations have increased the liquidity of interest-bearing deposits. We investigate the resulting bias. Suscient and necessary con...
| Autores: | , |
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| Tipo de recurso: | artículo |
| Estado: | Versión publicada |
| Fecha de publicación: | 2010 |
| País: | Brasil |
| Institución: | Fundação Getulio Vargas (FGV) |
| Repositorio: | Repositório Institucional do FGV (FGV Repositório Digital) |
| Idioma: | inglés |
| OAI Identifier: | oai:repositorio.fgv.br:10438/4152 |
| Acceso en línea: | http://hdl.handle.net/10438/4152 |
| Access Level: | acceso abierto |
| Palabra clave: | Welfare Money demand Interest-bearing monies Divisia index Inflation Economia Inflação |
| Sumario: | Most estimates of the welfare costs of in ation are devised considering only noninterest- bearing assets, ignoring that since the 80s technological innovations and new regulations have increased the liquidity of interest-bearing deposits. We investigate the resulting bias. Suscient and necessary conditions on its sign are presented, along with closed-form expressions for its magnitude. Two examples dealing with bidimensional bilogarithmic money demands show that disregarding interest-bearing monies may lead to a non-negligible overestimation of the welfare costs of in ation. An intuitive explanation is that such assets may partially make up for the decreased demand of noninterest-bearing assets due to higher in ation. |
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