Inflation and financial sector size

• 成果类型: Article
• 署名作者: English, WB
• 署名单位: Federal Reserve System - USA
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(99)00033-1
• 发表日期: 1999
• 页码: 379-400
• 关键词: inflation; money; financial services

摘要

Traditionally the cost of expected inflation has been seen as the 'shoeleather cost' of going to the bank more often. This paper focuses on the other side of these transactions - i.e., on the increased production of financial services. I construct a model in which households must make purchases either with money or with costly transactions services produced by firms in the financial services sector. In the model, a higher inflation rate leads households to substitute purchased transactions services for money balances, thereby boosting the size of the financial services sector. A test of the model using cross-sectional data finds that the size of a nation's financial sector is strongly affected by its inflation rate. The empirical results provide an alternative way to measure the costs of inflation. These costs appear to be large. (C) 1999 Published by Elsevier Science B.V. All rights reserved.