Sectoral money demand behaviour and the welfare cost of inflation in the UK.

Ashworth, J.; Barlow, D.; Evans, L.

Abstract

In this paper, we estimate separate UK money demand functions for the household and corporate sectors; and calculate estimates of the welfare cost of inflation. We find that the household sector bears most of the welfare burden which is in sharp contrast to previous (US) evidence. Also, we find aggregate welfare cost estimates that are much smaller than previous (largely US) estimates—sufficiently smaller as to challenge the oft-quoted Lucas finding that shoe leather costs are by no means trivial. For the UK, we find welfare costs no greater than one tenth of a per cent of real income.

Citation

Ashworth, J., Barlow, D., & Evans, L. (2014). Sectoral money demand behaviour and the welfare cost of inflation in the UK. Manchester School, 82(6), 732-750. https://doi.org/10.1111/manc.12047

• Journal Article Type: Article
• Acceptance Date: Sep 23, 2013
• Online Publication Date: Oct 31, 2013
• Publication Date: 2014-12
• Deposit Date: May 23, 2014
• Journal: the Manchester school
• Print ISSN: 1463-6786
• Electronic ISSN: 1467-9957
• Publisher: University of Manchester
• Peer Reviewed: Peer Reviewed
• Volume: 82
• Issue: 6
• Pages: 732-750
• DOI: https://doi.org/10.1111/manc.12047
• Public URL: https://durham-repository.worktribe.com/output/1454236