Measuring the welfare cost of inflation in South Africa : a reconsideration

dc.contributor.authorUwilingiye, Josine
dc.contributor.emailRangan.Gupta@up.ac.zaen_US
dc.contributor.upauthorGupta, Rangan
dc.date.accessioned2008-09-17T12:17:50Z
dc.date.available2008-09-17T12:17:50Z
dc.date.issued2008-06
dc.description.abstractIn this paper, using the Fisher and Seater (1993) long-horizon approach, we estimate the long-run equilibrium relationship between money balance as a ratio of income and the Treasury bill rate for South Africa over the period of 1965:02 to 2007:01, and, in turn, use the obtained estimates of the interest elasticity and the semi-elasticity to derive the welfare cost estimates of inflation, using both Bailey’s (1956) consumer surplus approach, as well, as Lucas’s (2000) compensating variation approach. When, the results are compared to welfare cost estimates obtained recently by Gupta and Uwilingiye (2008), using the same data set, but based on Johansen’s (1991, 1995) cointegration technique, the values are less by more than half in size than those obtained in the latter study, with the same being utmost ranging between 0.16 percent to 0.36 percent of GDP for the target-band of 3 percent to 6 percent of inflation. The paper, thus, highlights the fact that welfare cost estimates of inflation are sensitive to the methodology used to estimate the long-run equilibrium money demand relationships.en_US
dc.identifier.citationGupta, R & Uwilingiye, J 2008, 'Measuring the welfare cost of inflation in South Africa: a reconsideration', University of Pretoria, Department of Economics, Working paper series, no. 2008-09. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]en_US
dc.identifier.urihttp://hdl.handle.net/2263/7179
dc.language.isoenen_US
dc.publisherUniversity of Pretoria, Department of Economicsen_US
dc.relation.ispartofseriesWorking Paper (University of Pretoria, Department of Economics)en_US
dc.relation.ispartofseries2008-09en_US
dc.rightsUniversity of Pretoria, Department of Economicsen_US
dc.subjectLong-horizon regressionen_US
dc.subjectMoney demanden_US
dc.subjectWelfare cost of inflationen_US
dc.subjectCointegrationen_US
dc.subject.lcshInflation (Finance) -- South Africaen
dc.titleMeasuring the welfare cost of inflation in South Africa : a reconsiderationen_US
dc.typeWorking Paperen_US

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