A Cost-Benefit Analysis of Going from Low Inflation to Price Stability in Spain
In: The Costs and Benefits of Price Stability
This paper performs a cost-benefit analysis of moving from low inflation (roughly 3.5 percent) to price stability (about 1.5 percent) in Spain. Estimates of the costs (in terms of output losses) and the benefits (resulting from lower distortions in the tax system) are compared and evaluated. According to our results, going from low inflation to price stability in Spain seems a worthy enterprise, yielding an expected net beneficial permanent effect of about 0.7-1.0 percentage points of GDP per year in the more reasonable scenarios.
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