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On the Welfare Cost of Inflation and the Recent Behavior of Money Demand / Peter N. Ireland.
- Format:
- Book
- Author/Creator:
- Ireland, Peter N.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w14098.
- NBER working paper series no. w14098
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2008.
- Summary:
- 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.
- Notes:
- Print version record
- June 2008.
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