Economics

Shoe-Leather Cost of Inflation

The shoe-leather cost of inflation is the time and effort used in counter-acting inflation, especially in the situation of a hyperinflation.

When there is inflation, especially a hyperinflation, there is usually an increase in nominal interest rate, that is, the actual interest rate and the expected rate of inflation. The rise in interest rate leads to holding of less cash. People tend to invest their money. The additional cost of having to go to and from the bank or building societies where they keep their money is the shoe-leather cost .i.e. the wear and tear on their shoe leather, the cost of transport and other inconveniences.

Although the internet has reduced the wear and tear on the shoe, it is more convenient these days. Therefore, the shoe-leather cost of inflation is the opportunity cost of time and energy used in beating inflation.