2018/05/24 by MATTEO MOGLIANI, Matteo Mogliani, GIOVANNI URGA +1
Economics, Econometrics and Finance · #Demand for money #Economic Theory and Policy #Economic theories and models #Economics #Inflation (cosmology) #Keynesian economics #Macroeconomics #Market economy #Monetary Policy and Economic Impact #Monetary economics #Monetary policy #Welfare
paper · doi:10.1111/jmcb.12480
openalex publication_date 2018/05/24 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26
Abstract We evaluate the policy implications of measuring the welfare cost of inflation accounting for instabilities in the long‐run money demand for the United States over the period 1900–2013. We extend the analysis and reassess the results reported in Lucas (2000) and Ireland (2009), also considering the recent theoretical contributions of Lucas and Nicolini (2015) and Berentsen, Huber, and Marchesiani (2015). Breaks in the long‐run money demand give rise to regime‐dependent welfare cost estimates. We find that the welfare cost is about 0.1% of annual income over 1976–2013, as compared to 0.8% over 1945–75. Overall, these values are substantially lower than those reported in the literature.