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The Welfare Costs of Inflation

Working Paper 783 | Published September 24, 2021

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Luca Benati University of Bern
Juan Pablo Nicolini Senior Research Economist and Universidad Torcuato Di Tella
The Welfare Costs of Inflation


We revisit the estimation of the welfare costs of inflation originating from lack of liquidity satiation. We use data for the United States and several other developed countries. Our computations are heavily influenced by the recent experience of very low, even negative, short-term rates observed in the countries we study. We obtain estimates that range between 0.20% and 1.5% of lifetime consumption for the United States and find even higher values for some European countries.

Online Appendix: Working Paper 784