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Definition. Shoe leather costs refer to the increased costs of transactions caused by inflation, particularly the time and effort that individuals and businesses expend to reduce their cash holdings as prices rise.
Metaphorically, shoe leather cost is the cost of time and effort (or opportunity costs of time and effort) that people expend by holding less cash in order to reduce the inflation tax that they pay on cash holdings when there is high inflation.
8 Σεπ 2024 · Definition of Shoe-Leather Costs of Inflation. Shoe-leather costs refer to the costs associated with the increased frequency of transactions that result from high inflation. When inflation is high, holding money becomes costly because the purchasing power of money decreases over time.
Shoe Leather Costs - Key takeaways. Shoe leather costs are the costs that people incur to minimize their cash holdings during times of high inflation. Inflation is the general increase in the price level. Shoe leather costs are most prominent during times of hyperinflation.
28 Μαρ 2023 · Shoe leather costs are a real economic cost that can have a significant impact on economic growth. A study by the Federal Reserve Bank of St. Louis found that shoe leather costs could account for up to 10% of the decline in economic output during periods of high inflation.
Definition. Shoe-leather costs refer to the economic inefficiencies that arise when inflation causes individuals to reduce their cash holdings and increase their transactions in search of better value for their money.
