Data for: Money, liquidity and welfare

Abstract of associated article: This paper develops an analytically tractable Bewley model of money demand to shed light on some important questions in monetary theory, such as the welfare cost of inflation. It is shown that when money is a vital form of liquidity to meet uncertain consumption needs, the welfare costs of inflation can be extremely large. With log utility and parameter values that best match both the aggregate money demand curve suggested by Lucas (2000) and the variance of household consumption, agents in our model are willing to reduce consumption by 3–4% to avoid 10% annual inflation. The astonishingly large welfare costs of inflation arise because inflation increases consumption risk by eroding the buffer-stock-insurance value of money, thus hindering consumption smoothing at the household level. Such an inflation-induced increase in consumption risk at the micro level cannot be captured by representative-agent models or the Bailey triangle. Although the development of financial intermediation can mitigate the problem, with realistic credit limits the welfare loss of moderate inflation still remains several times larger than estimations based on the Bailey triangle. Our findings provide a strong justification for adopting a low inflation target by central banks, especially in developing countries where money is the major form of household financial wealth.关联论文摘要：本文构建了一个分析上易于处理的货币需求贝韦里模型（Bewley model），用以阐释货币理论中的若干核心议题，例如通货膨胀的福利成本。研究发现，当货币作为应对不确定消费需求的关键流动性载体时，通货膨胀的福利成本可能极为高昂。在采用对数效用函数，且参数设定同时匹配卢卡斯（Lucas, 2000）提出的总货币需求曲线与家庭消费方差的条件下，模型中的经济主体愿意通过削减3%至4%的消费水平，以规避10%的年度通胀。这类规模惊人的通货膨胀福利成本之所以产生，根源在于通货膨胀会侵蚀货币的缓冲储备保险价值，进而加剧消费风险，阻碍家庭层面的消费平滑。这种由通胀引致的微观层面消费风险波动，无法通过代表性主体模型（representative-agent models）或贝利三角（Bailey triangle）加以捕捉。尽管金融中介（financial intermediation）的发展能够缓解这一问题，但在符合现实的信贷约束下，温和通胀带来的福利损失仍比基于贝利三角估算的结果高出数倍。本文的研究结论为中央银行推行低通胀目标提供了强有力的理论支撑，尤其在货币构成家庭金融财富主要形式的发展中国家，这一结论的现实意义更为凸显。