چکیده:
The purpose of this paper is to estimate the welfare cost of inflation in Iran.
We first use the long-horizon regression approach developed by Fisher and Seater
(1993) to obtain an estimate of the inflation rate elasticity of money demand
and then the Baily’s consumer surplus approach to calculate the welfare cost
function. The results show that reducing inflation rate from 40% to 0% increases
the welfare of money holders by 0.3% of GDP. The welfare cost function helps the
central bank to estimate the welfare effects of monetary policy.
خلاصه ماشینی:
"We first use the long-horizon regression approach developed by Fisher and Seater (1993) to obtain an estimate of the inflation rate elasticity of money demand and then the Baily’s consumer surplus approach to calculate the welfare cost function.
Serletis and Yavari (2004) use different money demand function to estimate the welfare cost of inflation for a group of Latin American countries.
In this paper, we also use the inflation-based money demand function and the advanced econometrics technique to estimate the welfare cost of inflation for Iran using annual data over the period from 1960 to 2000.
We use the semi-log money demand function and the econometric methodology used by Serletis and Virk (2003) to get an estimate of the inflation rate elasticity, ξ.
To obtain an estimate of the inflation rate elasticity, we first investigate the time series properties of the money demand variables to avoid what Granger and Newbold (1974) refer to as spurious regression.
Since we are not able to find evidence of co-integration, to avoid the spurious regression problem we use the long-horizon regression approach developed by Fisher and Seater (1993) to obtain an estimate of the inflation rate elasticity of money demand.
For this purpose, we have used the long-horizon regression approach developed by Fisher and Seater (1993) to obtain an estimate of the inflation rate elasticity of money demand and Bailey’s (1956) approach to estimate the welfare cost of inflation."