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dc.contributor.authorChiu, Jonathanen_US
dc.contributor.authorMolico, Miguelen_US
dc.date.accessioned2011-12-15T12:56:27Z-
dc.date.available2011-12-15T12:56:27Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/53830-
dc.description.abstractThis paper studies the welfare costs and the redistributive effects of inflation in the presence of idiosyncratic liquidity risk, in a micro-founded search-theoretical monetary model. We calibrate the model to match the empirical aggregate money demand and the distribution of money holdings across households, and study the effects of inflation under the implied degree of market incompleteness. We show that in the presence of imperfect insurance the estimated long-run welfare costs of inflation are on average 40% smaller compared to a complete markets, representative agent economy, and that inflation induces important redistributive effects across households. For example, the welfare gains of reducing inflation from 10% to 0% is 0.59% of income. Furthermore, we estimate that the long-run welfare gains of reducing the typical current inflation target of 2 to 1 percent to be 0.06% of income.en_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2008,13en_US
dc.subject.jelE40en_US
dc.subject.jelE50en_US
dc.subject.ddc330en_US
dc.subject.keywordInflation: costs and benefitsen_US
dc.subject.keywordMonetary policy frameworken_US
dc.subject.stwInflationen_US
dc.subject.stwVerteilungswirkungen_US
dc.subject.stwSoziale Kostenen_US
dc.subject.stwGesamtwirtschaftliche Liquiditäten_US
dc.subject.stwVersicherungen_US
dc.subject.stwUnvollkommener Markten_US
dc.subject.stwRisikoen_US
dc.subject.stwGeldtheorieen_US
dc.subject.stwSuchtheorieen_US
dc.subject.stwGeldnachfrageen_US
dc.subject.stwTheorieen_US
dc.titleUncertainty, inflation, and welfareen_US
dc.typeWorking Paperen_US
dc.identifier.ppn56842011Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
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