On the welfare cost of inflation and the recent behavior of money demand
By: Peter N. Ireland.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 14098; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 14098.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Post-1980 U.S.  data trace out a stable long-run money demand relationship of Cagan's semi-log form between the M1-income ratio and the nominal interest rate, with an interest semi-elasticity below 2.  Integrating under this money demand curve yields estimates of the welfare costs of modest departures from Friedman's zero nominal interest rate rule for the optimum quantity of money that are quite small.  The results suggest that the Federal Reserve's current policy, which generates low but still positive rates of inflation, provides an adequate approximation in welfare terms to the alternative of moving all the way to the Friedman rule"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/14/2008.

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