Shoe-Leather Costs Reconsidered

Bank of England Working Paper No. 86

36 Pages Posted: 18 Jan 1999

See all articles by Jagjit S. Chadha

Jagjit S. Chadha

University of St. Andrews - School of Management

Andrew Haldane

Bank of England

Norbert Janssen

Bank of England

Date Written: 1998

Abstract

It has recently been suggested by Robert Lucas that "shoe-leather" costs of inflation may amount to as much as 1% of GNP in the United States. This paper assesses the U.K. evidence for the period 1970-1994. Similar estimates to those of Lucas are found using his original specification, but a preferred functional form using a semi-log interest elasticity of demand for money reveals a 0.22 % of GNP gain in perpetuity following a sustained fall in nominal interest rates from 6% to 2%.

JEL Classification: E31, E41, E43

Suggested Citation

Chadha, Jagjit S. and Haldane, Andrew and Janssen, Norbert, Shoe-Leather Costs Reconsidered (1998). Bank of England Working Paper No. 86. Available at SSRN: https://ssrn.com/abstract=139298 or http://dx.doi.org/10.2139/ssrn.139298

Jagjit S. Chadha (Contact Author)

University of St. Andrews - School of Management ( email )

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Andrew Haldane

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Norbert Janssen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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