Inflation, output and welfare

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by
Federal Reserve Bank of Minneapolis , [Minneapolis, Minn.]
Inflation (Fin
StatementRicardo Lagos and Guillaume Rocheteau.
SeriesFederal Reserve Bank of Minneapolis, Research Department staff report ;, 342, Staff report (Federal Reserve Bank of Minneapolis. Research Dept. : Online) ;, 342.
ContributionsRocheteau, Guillaume.
Classifications
LC ClassificationsHB1
The Physical Object
FormatElectronic resource
ID Numbers
Open LibraryOL3389944M
LC Control Number2004616695

The level of output increases with the rate of Inflation. Interestingly, we find that the effect of inflation on output can be nonmonotonic, just as suggested by the recent empirical evidence surveyed by Bullard ().

Inflating in excess of the Friedman rule may help raise output, but it always reduces welfare. Inflation, output, and welfare. Ricardo Lagos, Guillaume Rocheteau. Research output: Contribution to journal › Article.

Abstract. We study the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework.

We consider two pricing mechanisms: ex post bargaining and a notion of competitive pricing. Under bargaining, the equilibrium is generically inefficient and an increase in inflation reduces buyers' search intensities, output, and welfare.

If prices are posted and buyers can direct their search, search intensities are increasing with inflation for low inflation rates and decreasing for high inflation by: Under bargaining, the equilibrium is generically inefficient and an increase in inflation reduces buyers' search intensities, output, and welfare.

If prices are posted and buyers can direct their search, search intensities are increasing with inflation for low inflation rates and decreasing output and welfare book high inflation rates.

We study the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We consider two pricing mechanisms: ex post bargaining and a notion of. Downloadable (with restrictions).

We study the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We consider two pricing mechanisms: ex post bargaining and a notion of competitive pricing.

Under bargaining, the equilibrium is generically inefficient and an increase in inflation reduces buyers' search intensities, output, and welfare.

Description Inflation, output and welfare FB2

Abstract. This paper studies the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We allow money-holders to choose the intensities with which they search for trading partners, so inflation affects the frequency of trade as well as the quantity of output produced in each trade.

INFLATION, OUTPUT, AND WELFARE * INFLATION, OUTPUT, AND WELFARE * Lagos, Ricardo; Rocheteau, Guillaume In a monetary economy, Inflation is in everyone's private interest to try to get someone else to hold non‐interest‐bearing cash and reserves.

But someone has to hold it all, so all of these efforts must simply cancel out. This paper studies the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We allow money-holders to choose the intensities with which they search for trading partners, so inflation affects the frequency of trade as well as the quantity of output produced in each trade.

Output, Growth, Welfare, and Inflation: A Survey Joseph Senior Economist and Policy Advisor Federal Reserve Bank of Dallas F ormal statistical analyses fail to find a significant positive correlation between inflation and per capita output growth.

Inflation’s effect on economic activity, and ultimately on people’s well-being, is a. In staggered price models, a non-CES aggregator of differentiated goods generates empirically plausible short- and long-run trade-offs between output and inflation: lower trend inflation flattens the Phillips curve and decreases steady-state output by increasing markups.

We show that the aggregator reduces both the steady-state welfare cost of higher trend inflation and the inflation. Zero inflation: A constant price level from year to year means that inflation is zero. This is like a stationary car: the car’s location is constant and the distance travelled per hour is zero.

Inflation: Now, consider a rate of inflation, such as 2% per year. anticipated inflation will cost members of society more timan the revenue which accrues to the government.

The excess is called the excess burden, or “welfare cost” of inflation. Both the revenue and the welfare cost of inflation are positively related to the level of the rate of inflation.

Therefore, the “best” rate of in. Chapter pages in book: (p. 1 - 10) Introduction Robert E. Hall that ending inflation could decrease output and increase unemployment. His evidence, from a study of historical episodes in the United States, Germany, Switzerland, France, Japan, Italy, Brazil, and Israel, is not.

Several inflation thresholds may characterize the relationship between inflation and financial sector conditions. Most prominently, once inflation exceeds a critical level, incremental increases in the (long-run) rate of inflation may have no additional impact on financial sector activity.

is a platform for academics to share research papers. Inflation, Output, and Welfare By Ricardo Lagos and Guillaume Rocheteau This paper studies the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We allow money-holders to choose the intensities with which they search for.

The New Keynesian framework has emerged as the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. We study the welfare implication of average inflation targeting as a simple interest-rate rule, in which the monetary authority adjusts its short-term policy rate in response to the output gap as well as average inflation deviation from its target instead of reacting to the contemporaneous inflation rate as in a Taylor-type rule.

Economics and the Output- Inflation Trade-off IN THE EARLY s, the Keynesian view of business cycles was in trouble. The problem was not new empirical evidence against Keynesian. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare.

Nosal, E. () Search, welfare, and the hot potato effect of inflation. Macroeconomic Dynamics 15 (S2), – O'Dougherty, M. () Consumption Intensified: The Politics of Middle-Class Daily Life in Brazil. The welfare gain from reducing annual inflation towards the lower bound of the inside-money economy, −%, is about the same magnitude as the welfare cost of increasing inflation from 3% to 33%.

Further reducing the inflation rate beyond the level at which inside money has ceased to exist also results in a sizeable welfare gain. Surprisingly, a benchmark calibration implies an optimal inflation rate of percent. The analysis also shows that trend inflation has important effects on the economy when combined with nominal contracts and real output growth.

Steady-state output and welfare losses are quantitatively important even for low values of trend inflation. of stabilization policy on the average level of output. We again obtain a welfare-theoretic loss function that involves both inflation and an appropriately defined output gap, though the degree of distortion of the steady state affects both the weights on the two stabilization objectives and the definition of the welfare-relevant output gap.

Covering a broad range of theory and applications by well-known microeconomists, the eighteen contributions evaluate the effects of inflation on aggregate output and on welfare and reveal the scope of recent efforts to explicitly incorporate frictions in Format: Hardcover.

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Inflation Stabilization and Welfare Michael Woodford. NBER Working Paper No. Issued in January NBER Program(s):Economic Fluctuations and Growth, Monetary Economics This paper derives loss functions for monetary policy that are grounded in the welfare of private agents, for optimizing models with nominal price rigidities.

Downloadable. In this article, Joseph Haslag surveys both the theoretical results and the empirical evidence relating inflation to per capita real GDP growth. Theory yields mixed results: a permanent change in inflation can raise, lower, or have no impact on per capita output or its rate of growth.

The crucial factor seems to be the role money plays in the model economy. Inflation Stabilization and Welfare: The Case of a Distorted Steady State Pierpaolo Benigno, Michael Woodford. NBER Working Paper No. Issued in October NBER Program(s):Economic Fluctuations and Growth, Monetary Economics This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with.

Table Inflation and output growth relationship for high income countries, PSTR and IV-2SLS models. Table Inflation and output growth relationship for upper middle-income countries, PSTR and IV-2SLS models.

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Inflation stabilization and welfare: the case of a distorted steady state. [Pierpaolo Benigno; Michael Woodford; National Bureau of Economic Research.] -- "This paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price-setting.

Rotemberg and Woodford () and Woodford () have .The book further shows how the tools of modern macroeconomic theory can be used to design an optimal inflation-targeting regime--one that balances stabilization goals with the pursuit of price stability in a way that is grounded in an explicit welfare analysis, and that takes account of the "New Classical" critique of traditional policy.

Likewise, if inflation falls and economic output declines, the central bank will lower interest rates and make borrowing cheaper, along with .