Measuring the welfare costs of inflation in a life-cycle model

B-Tier
Journal: Journal of Economic Dynamics and Control
Year: 2015
Volume: 57
Issue: C
Pages: 132-144

Score contribution per author:

2.011 = (α=2.01 / 1 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

In a neoclassical growth model with life-cycle households in which money is held to satisfy a cash-in-advance constraint, the optimal steady state inflation rate is absurdly high: in excess of 20%. Lump-sum, age-independent money injections twist and flatten the lifetime profile of utility, making this profile look more like the one that would be chosen by a planner. The cost of monetary finance of lump-sum payments is the distortion introduced to the labor-leisure choice.

Technical Details

RePEc Handle
repec:eee:dyncon:v:57:y:2015:i:c:p:132-144
Journal Field
Macro
Author Count
1
Added to Database
2026-01-25