dc.contributor.author | Barro, Robert J. | |
dc.date.accessioned | 2010-01-12T19:11:36Z | |
dc.date.issued | 1972 | |
dc.identifier.citation | Barro, Robert J. 1972. Inflationary finance and the welfare cost of inflation. Journal of Political Economy 80(5): 978-1001. | en_US |
dc.identifier.issn | 0022-3808 | en_US |
dc.identifier.uri | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3451393 | |
dc.description.abstract | This paper applies previous theoretical and empirical results on inflation and demand for money to a study of inflationary finance and the welfare cost of inflation. The amount of revenue generated by a steady inflation is derived as a function of the inflation rate and some underlying parameters. Empirically, the revenue-maximizing rate is on the order of 140 percent per month with the corresponding revenue approximating 15 percent of national income. It is argued that hyper-inflations become unstable when the revenue-maximizing rate is exceeded. Because inflation leads to higher transaction costs (resulting from greater payment frequencies and reduced use of "money" as a payments medium), there is a net social cost attached to inflationary finance. The model implies that marginal collection costs of inflationary finance exceed 50 percent for all positive rates of inflation-hence, alternative means of raising revenue should be socially preferable. The analysis also provides estimates of the social gain from moving to the optimum quantity of money as 1-3 percent of income. | en_US |
dc.description.sponsorship | Economics | en_US |
dc.language.iso | en_US | en_US |
dc.publisher | University of Chicago Press | en_US |
dc.relation.isversionof | doi:10.1086/259946 | en_US |
dash.license | LAA | |
dc.title | Inflationary Finance and the Welfare Cost of Inflation | en_US |
dc.type | Journal Article | en_US |
dc.description.version | Version of Record | en_US |
dc.relation.journal | Journal of Political Economy -Chicago- | en_US |
dash.depositing.author | Barro, Robert J. | |
dc.date.available | 2010-01-12T19:11:36Z | |
dc.identifier.doi | 10.1086/259946 | * |
dash.contributor.affiliated | Barro, Robert | |