The Welfare Cost of Inflation in Iran (General Equilibrium Model Approach)

Articles in Press

Document Type : Research Paper

Authors

1 .

2 Islamic Azad University, Science and Research Branch

Abstract

During the past decades, research on the welfare costs of inflation has become an important part of monetary economics and, as a result, an important part of macroeconomics. The welfare cost of inflation includes welfare changes caused by inflation and is a category that shows the damage of inflation from the money channel. Therefore, the purpose of this research is to investigate the welfare cost of inflation in a steady state using the general equilibrium model approach for Iran's economy. So that the money has been entered in the model through the constraint of cash in advance. The results of the calibration show that with the increase in the monetary growth rate and consequently the inflation rate, employment, production and welfare gains will decrease in a steady state. In addition, with the reduction of the inflation rate from the benchmark case to the level of the quarterly inflation rate of 2%, the welfare gains will be equivalent to 0.11 of consumption. Therefore, based on the results, it is suggested that due to the effect of monetary policies on welfare, the efficiency of monetary policy should be taken into consideration.

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Quarterly Journal of Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 16 July 2025

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