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dc.contributor.author | Miller, Stephen M.![]() |
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dc.contributor.author | Martins, Luis Filipe![]() |
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dc.contributor.author | Gupta, Rangan![]() |
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dc.date.accessioned | 2019-05-28T11:40:42Z | |
dc.date.available | 2019-05-28T11:40:42Z | |
dc.date.issued | 2019-03 | |
dc.description.abstract | Money-demand specifications exhibit instability, especially for long spans of data. This paper reconsiders the welfare cost of inflation for the US economy using a flexible time-varying (TV) cointegration methodology to estimate the money-demand function. We find evidence that the TV cointegration estimation provides a better fit of the actual data than a time-invariant estimation and that the throughout unitary income elasticity only exists for the log–log form over the entire sample period. Our estimate of the welfare cost of inflation for a 10% inflation rate lies in the range of 0.025–0.75% of gross domestic product (GDP) and averages 0.27%. In sum, our findings fall well within the ranges of existing studies of the welfare cost of inflation. We find that the welfare cost averages 7.4% higher during expansions than recessions for 10% inflation rate. Finally, the interest elasticity of money demand shows substantial variability over our sample period. | en_ZA |
dc.description.department | Economics | en_ZA |
dc.description.librarian | hj2019 | en_ZA |
dc.description.uri | https://www.cambridge.org/core/journals/macroeconomic-dynamics | en_ZA |
dc.identifier.citation | Miller, S.M., Martins, L.F. & Gupta, R. 2019, 'A time-varying approach of the US welfare cost of inflation', Macroeconomic Dynamics, vol. 23, no. 2, pp. 775-797. | en_ZA |
dc.identifier.issn | 1365-1005 (print) | |
dc.identifier.issn | 1469-8056 (online) | |
dc.identifier.other | 10.1017/S1365100517000037 | |
dc.identifier.uri | http://hdl.handle.net/2263/69219 | |
dc.language.iso | en | en_ZA |
dc.publisher | Cambridge University Press | en_ZA |
dc.rights | © Cambridge University Press 2017 | en_ZA |
dc.subject | Money demand | en_ZA |
dc.subject | Curvature | en_ZA |
dc.subject | Monetary policy | en_ZA |
dc.subject | Cointegration | en_ZA |
dc.subject | Endogenous growth (Economics) | en_ZA |
dc.subject | United States (US) | en_ZA |
dc.subject | Error correction | en_ZA |
dc.subject | Welfare cost of inflation | en_ZA |
dc.subject | Time-varying cointegration | en_ZA |
dc.title | A time-varying approach of the US welfare cost of inflation | en_ZA |
dc.type | Postprint Article | en_ZA |