Authors
Sel Dibooglu, Turalay Kenc
Publication date
2009/5/1
Journal
Economic Modelling
Volume
26
Issue
3
Pages
650-658
Publisher
North-Holland
Description
There is a large and growing literature on the welfare cost of inflation. However, work in this area tend to find moderate estimates of welfare gains. In this paper we reexamine welfare costs of inflation within a stochastic general equilibrium balanced growth model paying a particular attention to recursive utility, portfolio balance effects, and monetary volatility and monetary policy uncertainty. Our numerical analysis shows that a monetary policy that brings down inflation to the optimum level can have substantial welfare effects. Portfolio adjustment effects seem to be the dominant factor behind the welfare gains.
Scholar articles
S Dibooglu, T Kenc - Economic Modelling, 2009