Costs and Benefits of reducing the Inflation Rate in Costa Rica
DOI:
https://doi.org/10.15359/eys.19-45.4Keywords:
cost of inflation, welfare.Abstract
This paper identifies the cost in welfare terms of reducing the inflation leveland compares it with the expected benefits. The costs are measured followingthe consumer surplus approach for which a money demand function forCosta Rica is estimated. The benefits are estimated discounting the expectedimprovement in the level of production due to the lower inflation. Bothestimations are compared and the net result for the 2008-2010 disinflationaryprocess is obtained. Finally, alternative future policies oriented to continuewith the disinflationary process are simulated and their results are evaluated.
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