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Some costs and benefits of price stability in the UK

Author

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  • Hasan Bakhshi
  • Andrew Haldane
  • Neal Hatch

Abstract

This paper quantifies some of the costs of inflation in the United Kingdom. It focuses in particular on inflation distortions under an imperfectly indexed tax system and distortions to money demand. In the United States, an earlier study by Feldstein found that lowering inflation by 2 percentage points could generate welfare benefits of as much as 1% of GDP per year forever. In the United Kingdom, the benefits are found to be smaller, but still substantial, at 0.2% of GDP per year.

Suggested Citation

  • Hasan Bakhshi & Andrew Haldane & Neal Hatch, 1998. "Some costs and benefits of price stability in the UK," Bank of England working papers 78, Bank of England.
    • Handle: RePEc:boe:boeewp:78
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1998/wp78.pdf
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    References listed on IDEAS

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    1. Greenspan, welfare states & inflation
      by chris dillow in Stumbling and Mumbling on 2007-09-18 14:41:46

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    3. Zafar Hayat, 2017. "Pakistan’s Monetary Policy: Some Fundamental Issues," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 56(1), pages 31-58.

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