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Deposit Spreads and the Welfare Cost of Inflation / Pablo Kurlat.
- Format:
- Book
- Author/Creator:
- Kurlat, Pablo.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w25385.
- NBER working paper series no. w25385
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2018.
- Summary:
- Since bank deposits and currency are substitutes and banks have monopoly power, higher nominal interest rates lead to higher deposit spreads. This raises the cost of transaction services, increases bank profits and attracts entry into the banking sector. Taking these effects into account, a one percentage point increase in inflation has a welfare cost of 0.086% of GDP, 6.9 times higher than traditional estimates.
- Notes:
- Print version record
- December 2018.
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