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Measuring the contribution of durable goods to the welfare cost of inflation
Author(s) -
Mansoorian Arman,
Michelis Leo
Publication year - 2016
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12215
Subject(s) - durable good , economics , welfare , inflation (cosmology) , context (archaeology) , cash , measure (data warehouse) , payment , microeconomics , goods and services , monetary economics , macroeconomics , economy , computer science , finance , market economy , physics , theoretical physics , paleontology , database , biology
In this paper, we measure the contribution of durable goods to the welfare cost of inflation, in the context of an endogenous growth model with durable and nondurable goods, where purchases of the latter require only a partial cash payment compared with the former. Unlike existing measures, our proposed welfare measure is computationally efficient and relatively easy to implement.We find that durability adds a significant component to the welfare costs of inflation.