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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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    1. 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.
    2. Martin Feldstein, 1997. "Capital Income Taxes and the Benefit of Price Stability," NBER Working Papers 6200, National Bureau of Economic Research, Inc.
    3. 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.
    4. Laurence Ball, 1993. "What Determines the Sacrifice Ratio?," NBER Working Papers 4306, National Bureau of Economic Research, Inc.
    5. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    6. Martin S. Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 123-166 National Bureau of Economic Research, Inc.
    7. Casey B. Mulligan & Xavier Sala-i-Martin, 1996. "Adoption of Financial Technologies: Implications for Money Demand and Monetary Policy," NBER Working Papers 5504, National Bureau of Economic Research, Inc.
    8. 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.
    9. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor, 2001. "Does inflation matter for growth?," Japan and the World Economy, Elsevier, vol. 13(4), pages 405-428, December.
    10. 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.
    11. José Manuel González-Páramo, 1991. "Imposición personal e incentivos fiscales al ahorro en España," Estudios Económicos, Banco de España;Estudios Económicos Homepage, number 46.
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