Seigniorage and the Welfare Cost of Inflation in Colombia

We compute both seigniorage rate and welfare cost if inflation rate in Colombia using a Sidrausky -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 hight inflation rates it reaches an asymptote.

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