welfare costs of inflation and interest bearing money this work extends the lucas analysis of the welfare cost of inflation to an economy with interest bearing deposits lower and upper bounds to lucas measure of the welfare cost of inflation are also provided the upper bound is shown to lie between lucas measure of the welfare cost of inflation and the area under the money demand curve starting with martin bailey in 1956 the literature on welfare costs of inflation has recently been enriched by contributions among others by lucas 1993 2000 dotsey and ireland 1996 and gillman 1993 1995 it remains yet to adequately integrate the banking sector in this process this work extends lucas analysis of the welfare cost of inflation developed in the mccallumgoodfriend 1987 framework to an economy with interest bearing deposits lower and upper bounds to lucas measure of the welfare cost of inflation are also provided the upper bound is shown to lie between lucas measure and the area under the money demand curve which characterizes bailey s method 1956 for calculating the welfare cost of inflation

bailey s measure of the welfare costs of inflation as a general equilibrium measure lucas 2000 has shown that bailey s formula for the welfare costs of inflation can be regarded as an approximation to the general equilibrium measures that emerge from the sidrauski and the shopping time models in this paper we show that bailey s measure can be exactly obtained in the sidrauski general equilibrium framework under the assumption of quasilinear preferences the result based on whether or not wealth effects are incorporated into the analysis is also helpful in clarifying why lucas measure derived from the sidrauski model turns out to be an upper bound to bailey s two examples are used to illustrate the main conclusions

inflation and welfare in a monetary economy it 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 these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

inflation and income inequality a shopping time approach abstract our work is based on a heterogenous agent shopping time economy in which economic agents present distinct productivities in the production of the consumption good and differentiated access to transacting assets the purpose of the analysis is to investigate whether this setting can lead to a positive correlation between inflation and income inequality our main result is to show that provided the productivity of the interest bearing asset in the transacting technology is high enough it is true that a positive link between inflation and income inequality is generated an example is offered to illustrate the mechanism

divisia index inflation and welfare this work addresses a usual criticism in the literature of the welfare costs of inflation related to the tact that some items in the relevant definition of money pay interest while others do not we show that the problem can be solved by using a divisia index of monetary services as the welfare measure

transaction services inflation and welfare this paper is motivated by empirical observations on the comovements of currency velocity inflation and the relative size of the credit services sector we document these comovements and incorporate into a monetary growth model a credit services sector that provides services that help people economize on money our model makes two new contributions first we show that direct evidence on the appropriately defined credit service sector for the united states is consistent with the welfare cost measured using an estimated money demand schedule second we provide estimates of the welfare cost of inflation that have some new features

the n dimensional bailey divisia measure as a general equilibrium measure of the welfare costs of inflation abstract this paper shows that in economies with several monies the bailey divisia multidimensional consumers surplus formula may emerge as an exact general equilibrium measure of the welfare costs of inflation provided that preferences are quasilinear

overcoming accumulation is a capitalist steady state economy possible abstract this article critically reviews the case for a steady state zero growth economy posing the question whether such an economy can be stable and socially just given that in the current global economy lack of growth is synonymous with crisis the sse thesis is analysed within a framework of marxian political economy concluding that a stable and just sse is possible but not feasible within the social relations of capitalism using the marxian analysis of capital accumulation the article then considers whether the reforms proposed by ecological economists can form an effective countervailing force to the drive for accumulation the conclusion is that such reforms can be successful but only in so far as they are complemented and brought to their logical conclusion by a wider attempt to transcend the capitalist relations of production

deposit spreads and the welfare cost of inflation abstract high nominal interest rates are associated with high deposit spreads which is consistent with a model where banks have monopoly power and currency and deposits are substitutes therefore higher interest rates raise the implicit price of banking services increase bank profits and attract entry into the banking sector taking these effects into account a one percentage point increase in inflation has a welfare cost of 0 083 of gdp 6 7 times higher than traditional estimates

degrowth and the supply of money in an energy scarce world abstract degrowth is going to happen whether governments want it or not because as fossil fuels run out incomes will shrink along with the energy supply this degrowth can either be unplanned and catastrophic or managed and relatively benign this paper argues that three tools are essential to avoid degrowth becoming a catastrophic collapse these are i a system to share the benefits from using increasingly scarce fossil fuels ii new ways of financing businesses and iii the introduction of debt free regional and local currencies

on the instability of long run money demand and the welfare cost of inflation in the united states we evaluate the policy implications of measuring the welfare cost of inflation accounting for instabilities in the long run money demand for the u s 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 et al 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 1975 overall these values are substantially lower than those reported in the literature

the welfare costs of moderate inflations in the recent past the view that a little bit of inflation was good for the economy was widely held the phillips curve in its earlier incarnations implied that moderate inflation was worth tolerating because it would permit lower unemployment this justification for tolerating inflation has long since been abandoned by economists and policymakers because both theory and experience showed it to be false nevertheless one legacy of this era seems to be a fairly widespread tolerance for moderate inflation recently there has been much discussion of removing this inflationary bias by passing legislation that would require the federal reserve to target zero inflation in this paper we examine some of the consequences of achieving that goal we appraise the revenue and welfare costs of policies designed to reduce moderate inflation rates to zero much has been written about why government policies may have an inflationary bias in this paper we don t address the issue of what motivates governments to inflate implicit in our analysis however is the notion that one important motive for inflation is the revenue raising potential of the inflation tax it would be difficult to argue that the inflation tax constitutes an important revenue source for the united states one indirect and very imperfect measure of this would be contributions by the federal lleserve to the treasury in recent years those rebates have amounted to

retailer s economic order quantity when the supplier offers conditionally permissible delay in payments link to order quantity abstract trade credit financing is increasingly recognized as an important strategy to increase profitability in inventory management we revisit an economic order quantity model under conditionally permissible delay in payments in which the supplier offers the retailer a fully permissible delay of m periods i e there is no interest charge until m if the retailer orders more than or equal to a predetermined quantity w however if the retailer s order quantity is less than w then the retailer must make a partial payment to the supplier and enjoy a permissible delay of m periods for the remaining balance in this paper we extend the mentioned eoq under conditionally permissible delay in payments to complement some shortcomings of the model by contrast to the differential calculus method we propose a simple arithmetic geometric method to solve the problem furthermore we establish some discrimination terms to identify the unique optimal solution among three alternatives and explain those theoretical results by simply economical interpretations finally we solve several numerical examples to illustrate the theoretical results and obtain some managerial implications

on the integrability of money demand functions by the sidrauski and the shopping time models abstract this paper investigates which properties money demand functions must satisfy so that they are consistent with lucas s lucas jr r e 2000 inflation and welfare econometrica 68 247 274 versions of the sidrauski and the shopping time models we conclude that shopping time integrable money demand functions are necessarily also sidrauski integrable but that the converse is not necessarily true unless a boundedness assumption on the nominal interest rate is made both the log log with an interest rate elasticity greater than or equal to one and the semi log money demands may serve as counterexamples all the models and results are also extended to the case in which there are several assets in the economy performing monetary functions

can de growth be considered a policy option a historical note on nicholas georgescu roegen and the club of rome abstract at a few months interval georgescu roegen s the entropy law and the economic process 1971 and club of rome s limits to growth 1972 were published both emphasized the dangers of economic growth and both drew negative reactions from mainstream economists relying on archival evidence we show that georgescu roegen and the club of rome developed strategies of mutual support which would present them at first view as natural allies georgescu roegen actually became a member of the club of rome while dennis meadows acknowledged the influence of georgescu roegen s ideas on the team of authors of limits to growth but in the late 70 s the gap widened between georgescu roegen s adamant defense of de growth and the club of rome s less firm view of sustainable growth this paper explores the process leading to the self isolation of georgescu roegen by showing that beyond a shared acknowledgment that economic and biologic systems were interdependent technological optimism and ambitions for the global management of growth were central to the club of rome while georgescu roegen s personal history led him to ignore those practicalities and judge that de growth was inescapable

disinflation and interest bearing money in high inflation countries policymakers often end up paying interest on part of the money supply higher interest rates on money have been used as a disinflationary policy this paper analyzes the effectiveness of such a policy in the context of a closed economy staggered prices model both a permanent and a temporary rise in the interest rate on money provoke an inflation at the expense of a recession when the rise is temporary however the initial inflation slowdown is eventually followed by an upsurge of inflation over the level prevailing before the policy was implemented copyright 1996 by royal economic society

welfare costs of inflation when interest bearing deposits are disregarded a calculation of the bias abstract most estimates of the welfare costs of inflation are devised considering only noninterest bearing assets ignoring that since the 1980s technological innovations and new regulations have increased the liquidity of interest bearing deposits we investigate the resulting bias sufficient and necessary conditions on its sign are presented along with closed form expressions for its magnitude two examples dealing with bidimensional bilogarithmic money demands show that disregarding interest bearing monies may lead to a non negligible overestimation of the welfare costs of inflation an intuitive explanation is that such assets may partially make up for the decreased demand of noninterest bearing assets due to higher inflation

on the markov switching welfare cost of inflation abstract this paper uses the markov switching approach to account for instabilities in the long run money demand function and compute the welfare cost of inflation in the united states in doing so it circumvents the problem of data mining of some earlier seminal contributions on these issues allowing for complicated nonlinear dynamics and sudden changes in the parameters of the money demand function moreover it extends the sample period and investigates the robustness of results to alternative money demand specifications monetary aggregation procedures and assumptions regarding dynamics aspects of the money demand specification

the paradox of growth critique narrative analysis of the finnish sustainable consumption and production debate abstract academic discussion on economic growth and the environment has made a comeback under the auspices of the degrowth debate to date however literature on the topic has been mainly theoretical and empirical studies of actual policy discussions have received less attention this article contributes to the debate with a narrative policy analysis of interviews with members of finland s committee on sustainable consumption and production narrative policy analysis is suitable for complex policy cases by tracing and comparing the different stories non stories and counterstories in the debate the analysis clarifies the issue and paves the way for solutions we found that it is common even among business and ministry representatives to criticize the current growth bound economic system from the perspective of narrative policy analysis however this critique only increases uncertainty and complexity in the policy field which paradoxically leads to a strengthening of the dominant growth stories we suggest that constructing a complete degrowth story is essential for supporting democratic deliberation on sustainability robust institutional support for degrowth work together with research and experimentation are important milestones on the way

the 2008 oil bubble causes and consequences abstract we argue that the 2008 oil bubble was directly and indirectly created by the federal reserve in response to deflationary risks that resurfaced after the housing bubble burst and the resulting credit crisis of 2008 deflationary risks first appeared after the dot com bubble burst in 2000 and after the terrorist attacks on september 11 2001 manipulation of the us dollar value has been one of the key emergency tools in the fed s arsenal during the entire period from 2000 to 2008 the us dollar has been falling while the price of crude oil has been rising with the culmination in july 2008 if other global central banks embrace the fed s anti deflationary strategies the consequences could be dire for the global economy potentially resulting in an ultimate gold bubble

a note on inflation and welfare abstract this note provides an analytical confirmation and a refinement of lucas jr r e 2000 inflation and welfare econometrica 68 62 247 274 march numerical findings regarding the characterization of optimality in the shopping time model presented in that paper the original numerical analysis concludes that a coefficient of risk aversion greater than 0 01 is sufficient for optimality here we use arrow s sufficiency theorem to confirm this result and more importantly to show without more calculations how changes in parameters can affect it

the economic and financial dimensions of degrowth abstract we respond to the call for future research on degrowth and specifically analyze the implications of economic degrowth on the monetary and financial system we argue that any early indications of degrowth would cause the stock market to crash which would trigger further deleveraging contagion and a deflation as a result the economy would implode which would eventually allow for a new rapid growth cycle given the likely extraordinary fiscal and monetary policy response during the implosion thus in our view degrowth as an explicit strategy option is economically unsustainable and unfeasible as a limitation our analysis centers on the examples of unplanned crisis leading to an economic implosion which imperfectly represent the idea of planned voluntary degrowth

why environmental sustainability can most probably not be attained with growing production the concepts of welfare economic growth production environmentally sustainable national income environmental sustainability environmental function and asymmetric entering are defined because the confusion about these concepts hampers sound information based on these concepts the arguments are enumerated why it is plausible that environmental sustainability most probably cannot be attained with a growing production level national income ni and why broad acceptance of a lower production level meaning de growth of production will make attaining this goal much easier or at least possible some consequences of unsustainable development are provided and the alleged conflict between employment and environment is refuted the conclusion is that our planet is threatened by a wrong belief in a wrongly formulated growth

sweep programs and optimal monetary aggregation abstract this paper examines the admissibility of monetary aggregate groupings for the us over 1993 2001 based upon weak separability we investigate the impact of retail and commercial demand deposit sweep programs on the separability of monetary asset groupings weak separability is tested using the swofford whitney and fleissig whitney tests we use varian s measurement error adjustment procedure to eliminate violations of the generalized axiom of revealed preference garp when funds from both retail and commercial demand deposit sweep programs are placed within checkable deposits all groupings narrow and broad pass garp and weak separability for groupings based on conventional money measures tests tend to favor broad aggregates