Abstract
This article follows Lucas (Citation2000) and Serletis and Yavari (Citation2005) and estimates the welfare cost of inflation in the Euro zone. It uses recent advances in the field of applied econometrics to estimate the interest elasticity of money demand and reports that the welfare cost of inflation is lower in big countries than it is in small countries.
Acknowledgements
Serletis acknowledges support from the Social Sciences and Humanities Research Council of Canada.