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Title:The welfare effects of inflation: a cost-benefit perspective PDF Logo
Authors:Tödter, Karl-Heinz
Manzke, Bernhard
Issue Date:2007
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2007,33
Abstract:This paper reviews theory and evidence of the welfare effects of inflation from a costbenefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More recently, interactions of inflation and taxation came into focus. Growth effects of inflation as well as welfare effects of unanticipated inflation and of inflation uncertainty are also addressed. To assess the policy question whether inflation should be reduced or eliminated, the costs of disinflation play a role. Finally, the trade-off between the benefits of reducing inflation and the costs of disinflation is discussed and an overall assessment of the net welfare effects of achieving price stability is provided.
Subjects:Inflation
price stability
welfare costs and benefits
distortions
money demand
consumption allocation
tax-inflation interaction
JEL:E41
E31
H21
E21
D61
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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