Transaction services, inflation, and welfare

S. Rao Aiyagari, R. Anton Braun, Zvi Eckstein

Research output: Contribution to journalArticlepeer-review

Abstract

This paper is motivated by empirical observations on the comovements of currency velocity, inflation, and the relative size of the credit services sector. We document these comovements and incorporate into a monetary growth model a credit services sector that provides services that help people economize on money. Our model makes two new contributions. First, we show that direct evidence on the appropriately defined credit service sector for the United States is consistent with the welfare cost measured using an estimated money demand schedule. Second, we provide estimates of the welfare cost of inflation that have some new features.

Original languageEnglish
Pages (from-to)1274-1301
Number of pages28
JournalJournal of Political Economy
Volume106
Issue number6
DOIs
StatePublished - 1998

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