Seigniorage and the Welfare Cost of Inflation in Colombia
La serie Borradores de Economía es una publicación de la Subgerencia de Estudios Económicos del Banco de la República. Los trabajos son de carácter provisional, las opiniones y posibles errores son responsabilidad exclusiva del autor y sus contenidos no comprometen al Banco de la República ni a su Junta Directiva.
We compute both seigniorage rate and welfare cost of inflation rate in Colombia using a Sidrauski-type model in which preferences are separable functions of the service flows of non-durable goods and money holdings. The set of the estimated parameters imply sizeable welfare cost of inflation and seigniorage rates. However, eventhough for low inflation rates seigniorage rate markedly increases with the rate of inflation, for very high inflation rates it reaches an asymptote.
