عنوان مقاله [English]
نویسندگان [English]چکیده [English]
Inflation has negative effects on economic welfare in different ways. In other words, it may cause welfare costs for society. Many studies indicate that there is a positive and statistically significant relationship between monetary policy and inflation, particularly in developing countries including Iran. Estimation of welfare cost of inflation may help policy makers as well as monetary authorities to evaluate the welfare effects of their policies and decide how to proceed.
This paper defines a money demand function for Iran's money market, then by applying advanced econometrics techniques and based on Lucas Logarithmic model (2000) and Caygan’s semi log version (1956), the welfare cost of inflation is estimated for the period of 1958-2007.
The results indicate that if the inflation rate increase from 3 percent to 15 percent, the welfare cost of inflation based on the logarithmic model would increase from 0.14 percent of GDP to 1.7 percent of GDP and based on the semi logarithmic model, from 0.12 GDP to 2.3 percent of GDP. The paper argues that the semi logarithmic model is more appropriate for calculating welfare cost of Inflation in Iran