TY - JOUR
T1 - Seigniorage and the welfare cost of inflation. Evidence from an intertemporal model of money and consumption
AU - Eckstein, Zvi
AU - Leiderman, Leonardo
PY - 1992/6
Y1 - 1992/6
N2 - This paper empirically investigates the restrictions embodied in a Sidrauski-type model for the cross-relations between consumption, money holdings, inflation, and assets' returns using quarterly data for the high-inflation economy in Israel, 1970-1988. Using a set of the estimated parameters it is shown that the model's implications for seigniorage are quite different than those from a Cagan-type model. That is, while the model is able to account for the observed stability of the seigniorage-GNP ratio, a Cagan-type model predicts a Laffer curve for seigniorage. The estimates also imply sizeable welfare costs of inflation.
AB - This paper empirically investigates the restrictions embodied in a Sidrauski-type model for the cross-relations between consumption, money holdings, inflation, and assets' returns using quarterly data for the high-inflation economy in Israel, 1970-1988. Using a set of the estimated parameters it is shown that the model's implications for seigniorage are quite different than those from a Cagan-type model. That is, while the model is able to account for the observed stability of the seigniorage-GNP ratio, a Cagan-type model predicts a Laffer curve for seigniorage. The estimates also imply sizeable welfare costs of inflation.
UR - http://www.scopus.com/inward/record.url?scp=44049118941&partnerID=8YFLogxK
U2 - 10.1016/0304-3932(92)90033-X
DO - 10.1016/0304-3932(92)90033-X
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AN - SCOPUS:44049118941
SN - 0304-3932
VL - 29
SP - 389
EP - 410
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
IS - 3
ER -