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A Cost-Benefit Analysis of Going from Low Inflation to Price Stability in Spain

In: The Costs and Benefits of Price Stability

  • Juan Dolado

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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This chapter was published in:
  • Martin Feldstein, 1999. "The Costs and Benefits of Price Stability," NBER Books, National Bureau of Economic Research, Inc, number feld99-1, September.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7772.
    Handle: RePEc:nbr:nberch:7772
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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    1. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor, 2001. "Does inflation matter for growth?," Japan and the World Economy, Elsevier, vol. 13(4), pages 405-428, December.
    2. Martin S. Feldstein, 1999. "Capital Income Taxes and the Benefit of Price Stability," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 9-46 National Bureau of Economic Research, Inc.
    3. Martin Feldstein, 1996. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Working Papers 5469, National Bureau of Economic Research, Inc.
    4. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
    5. Casey B. Mulligan & Xavier Sala-i-Martin, 1995. "Adoption of financial technologies: Implications for money demand and monetary policy," Economics Working Papers 134, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Laurence Ball, 1993. "What determines the sacrifice ratio?," Working Papers 93-21, Federal Reserve Bank of Philadelphia.
    7. José Manuel González-Páramo, 1991. "Imposición personal e incentivos fiscales al ahorro en España," Estudios Económicos, Banco de España;Estudios Económicos Homepage, number 46.
    8. Stanley Fischer & Franco Modigliani, 1978. "Towards An Understanding of the Real Effects and Costs of Inflation," NBER Working Papers 0303, National Bureau of Economic Research, Inc.
    9. Timothy Kehoe & Antonio Manresa & Clemente Polo & Ferrán Sancho, 1989. "Un análisis de equilibrio general de la reforma fiscal de 1986 en España," Investigaciones Economicas, Fundación SEPI, vol. 13(3), pages 337-385, September.
    10. Manuel Jaen & Agustin Molina, 1994. "Un análisis empírico de la tenencia y demanda de vivienda en Andalucía," Investigaciones Economicas, Fundación SEPI, vol. 18(1), pages 143-164, January.
    11. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
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