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Inflation and welfare in long-run equilibrium with firm dynamics
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Janiak, Alexandre and Santos-Monteiro, Paulo (2011) Inflation and welfare in long-run equilibrium with firm dynamics. Journal of Money, Credit & Banking, Vol.43 (No.5). pp. 795-834. doi:10.1111/j.1538-4616.2011.00398.x ISSN 0022-2879.
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Official URL: http://dx.doi.org/10.1111/j.1538-4616.2011.00398.x...
Abstract
We analyze the welfare cost of inflation in a model with a cash-in-advance constraint and an endogenous distribution of establishments' productivities. Inflation distorts aggregate productivity through firm entry dynamics. The model is calibrated to the U. S. economy and the long-run equilibrium properties are compared at low and high inflation. When the period over which the cash-in-advance constraint is binding is one quarter, an annual inflation rate of 10% leads to a decrease in average productivity of roughly 0.5% compared to the optimum. This decrease is not innocuous: it leads to a doubling of the welfare cost of inflation.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Welfare economics, Inflation (Finance) -- Mathematical models, Industrial productivity -- Effect of inflation on | ||||
Series Name: | Warwick economic research papers | ||||
Journal or Publication Title: | Journal of Money, Credit & Banking | ||||
Publisher: | Wiley-Blackwell Publishing, Inc. | ||||
Place of Publication: | Coventry | ||||
ISSN: | 0022-2879 | ||||
Official Date: | 15 August 2011 | ||||
Dates: |
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Volume: | Vol.43 | ||||
Number: | No.5 | ||||
Number of Pages: | 46 | ||||
Page Range: | pp. 795-834 | ||||
DOI: | 10.1111/j.1538-4616.2011.00398.x | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) |
Data sourced from Thomson Reuters' Web of Knowledge
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Inflation and welfare in long-run equilibrium with firm dynamics. (deposited 01 Sep 2009 10:11)
- Inflation and welfare in long-run equilibrium with firm dynamics. (deposited 21 Oct 2011 13:56) [Currently Displayed]
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