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Estimation of welfare costs of inflation: The case of Russia
https://doi.org/10.32609/0042-8736-2019-9-55-69
Abstract
This paper is devoted to the estimation of welfare costs of inflation, taking into account the peculiarities of the Russian economy. Theoretical approaches that are used in the literature to analyze the costs of inflation are discussed in the paper. It also provides an overview of the empirical studies of this topic. Research found in academic literature shows that the results of quantitative estimates are extremely sensitive to the choice of the functional form of the money demand equation, as well as to assumptions that are made to simplify the analysis, some of which do not fit Russian data. As a result, we have modified the standard approaches to estimating welfare costs of inflation, taking into account the monetization growth in Russia, and provide quantitative estimates of the magnitude of welfare costs of inflation. The results indicate a significant gain for economic agents in terms of real GDP with a decrease in inflation, which is regarded as a positive effect from the inflation targeting policy.
About the Authors
Sergey M. Drobyshevskiy
Gaidar Institute for Economic Policy
Russian Federation
Moscow
Russian Federation
Moscow
Natalia V. Makeeva
Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Moscow
Russian Federation
Moscow
Elena V. Sinelnikova-Muryleva
Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Moscow
Russian Federation
Moscow
Pavel V. Trunin
Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Moscow
Russian Federation
Moscow
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For citations:
Drobyshevskiy S.M., Makeeva N.V., Sinelnikova-Muryleva E.V., Trunin P.V. Estimation of welfare costs of inflation: The case of Russia. Voprosy Ekonomiki. 2019;(9):55-69. (In Russ.) https://doi.org/10.32609/0042-8736-2019-9-55-69
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