Shoe-Leather Costs Reconsidered

Sectoral Money Demand and the Great Disinflation in the United States

“…In addition, he notes that in the framework of the shopping‐time model of money demand determination by McCallum and Goodfriend (1987) and for reasonable estimates of the interest rate elasticity, the log–log money demand equation is consistent with inventory‐theoretic money demand models, such as the Baumol–Tobin model. Chadha, Haldane, and Janssen (1998) concur on the theoretical superiority of the log–log form. Also using McCallum and Goodfriend’s model, these authors show that the choice of any well‐behaved utility function and transactions technology (e.g., Cobb‐Douglas, constant elasticity of substitution, and translog functions) is likely to result in a log–log specification of long‐run money demands.…”

Social Security: National Policies with International Implications

“…Another interesting comparison is with the welfare gains from reduced in¯ation. The most recent study of this, by Chadha et al (1998) estimates an optimal nominal interest rate for the United Kingdom of around 2%, and estimates a net welfare gain from moving from 6% to 2% of around 0.22% of GNP (Chadha et al, 1998, p. 381). Again, this is smaller than the lowest welfare gain in Table 1.…”

“…Since the former are always better 20 It should be noted that considerably larger welfare gains from lower in¯ation are estimated by Lucas (1995), quoted by Chadha et al (1998) Barro et al (1995) do not consider this point; as already noted, they impose, rather than derive, a value of r 6%. off than the latter in terms of life time utility, 22 and since policy co-ordination always involves q Ãà , q à , co-ordination is unambiguously inegalitarian in its effects, and life cyclers unambiguously gain.…”

Price setting and the steady-state effects of inflation

“…The study of the long-term effects of inflation and its welfare cost in optimizing monetary models has received much attention in the last few years (recent contributions include Dotsey and Ireland (1996), Wolman (1997), Chadha, Haldane and Janssen (1998), Wu and Zhang (2000), and Lucas (2000)). Most of the papers give welfare cost of inflation figures relative to the Friedman rule rate (Friedman (1969)), as they claim that Friedman's result is applicable in optimizing monetary models.…”

“…by Zbaracki et al (2000) to provide some empirical evidence supporting it. 4 Menu costs should be defined in a very broad sense so as to include the direct costs of re-labelling together with all the indirect costs associated to new prices (information costs, consumers dislike, adjustment costs,...).…”