The welfare cost of inflation in Italy

Abstract

Abstract This paper follows Lucas (Citation2000), and Serletis and Yavari (Citation2004) and estimates the welfare cost of inflation in Italy. It uses recent advances in the field of applied econometrics to estimate the interest elasticity of money demand in Italy and reports welfare cost estimates close to those reported by Serletis and Yavari for Canada and the USA, but an order of magnitude smaller than those reported by Bullard and Russell (Citation2004) for the US economy. Acknowledgements Serletis acknowledges support from the Social Sciences and Humanities Research Council of Canada.