Two theoretical arguments why a high level of inflation is bad (e.g. for growth) are:

  • shoe-leather cost: keeping lower money balances when inflation is high (implying more frequent trips to the bank/ATM).
  • menu cost: time and effort to change price lists in an inflationary environment

Are there any empirical studies that measured these two costs? (And I mean measure them separately from the slower growth due to inflation, which in itself is somewhat controversial, e.g. Barro (1995) vs Emara (2012).)

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    $\begingroup$ Indirectly related: high (but not hyper) inflation in Brazil made banks compete to transfer money more quickly so that it lost less value and interest in that time period, leading to efficiency gains across the economy and a model for fast transfer later adopted in Europe $\endgroup$
    – Henry
    Aug 25, 2018 at 18:07


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