Heterogeneity and the welfare cost of inflation 1 preliminary and incomplete- please do not circulate (2007).

Content Provider	CiteSeerX
Author	Boel, Paola
Abstract	We study a heterogeneous economy where agents hold cash to insure against consumption risk and differ in either their matching profiles, discount factors or labor disutilities. For some forms of heterogeneity, different agent types hold different money balances in equilibrium. This heterogeneity generally disappears if nominal interest rates are zero. We then calibrate the model for the U.S. economy and use it to quantify the welfare cost of inflation. Results are affected by the distribution of agents ’ types and the kind of heterogeneity considered. With heterogeneity in discounting or disutility, different agents face different- though always positive- welfare costs of inflation. When agents differ in their matching profiles instead, positive inflation can be welfare increasing for agents with low consumption risk.
File Format	PDF
Publisher Date	2007-01-01
Access Restriction	Open
Subject Keyword	Welfare Cost Preliminary Incomplete Please Matching Profile Heterogeneous Economy Discount Factor Agent Type Positive Inflation Low Consumption Risk Different Money Balance Different Agent Type Positive Welfare Cost Consumption Risk Different Agent Nominal Interest Rate U.s. Economy Labor Disutilities
Content Type	Text