IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Benefits of Low Inflation: Taking Shock "A nickel ain't worth a dime any more" [Yogi Berra]

  • O'Reilly, B.
Registered author(s):

    This paper surveys the empirical literature on the benefits of low inflation emphasizing contributions since 1990. It follows the framework of a section in the Bank's 1990 Annual Report, "The Benefits of Price Stability." This framework looks at the costs of inflation, or the benefits of price stability, in the context of four themes: inflation creates uncertainty about the future; there are costs of having to cope with inflation; inflation affects equity and fairness; and 'living with inflation' is no answer.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.bankofcanada.ca/en/res/tr/1998/tr83.pdf
    Download Restriction: no

    Paper provided by Bank of Canada in its series Technical Reports with number 83.

    as
    in new window

    Length: 74 pages
    Date of creation: 1998
    Date of revision:
    Handle: RePEc:bca:bocatr:83
    Contact details of provider: Postal:
    234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada

    Phone: 613 782-8845
    Fax: 613 782-8874
    Web page: http://www.bank-banque-canada.ca/

    References listed on IDEAS
    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.:

    as in new window
    1. Jones, Larry E. & Manuelli, Rodolfo E., 1995. "Growth and the effects of inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1405-1428, November.
    2. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
    3. Stanners, W, 1993. "Is Low Inflation an Important Condition for High Growth?," Cambridge Journal of Economics, Oxford University Press, vol. 17(1), pages 79-107, March.
    4. 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.
    5. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
    6. David Mayes & Bryan Chapple, 1995. "The costs and benefits of disinflation: a critique of the sacrifice ration," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 58, March.
    7. David Altig, 1992. "An ebbing tide lowers all boats: monetary policy, inflation, and social justice," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 14-22.
    8. Goodfriend, Marvin, 1997. "A framework for the analysis of moderate inflations," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 45-65, June.
    9. Baillie, Richard T. & Bollerslev, Tim, 1992. "Prediction in dynamic models with time-dependent conditional variances," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 91-113.
    10. Zvi Eckstein & Leonardo Leiderman, 1991. "Seigniorage and the welfare cost of inflation: evidence from an intertemporal model of money and consumption," Discussion Paper / Institute for Empirical Macroeconomics 40, Federal Reserve Bank of Minneapolis.
    11. S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
    12. Seamus Hogan, 1998. "What Does Downward Nominal-Wage Rigidity Imply for Monetary Policy?," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 513-525, December.
    13. Taylor, John B., 1981. "On the relation between the variability of inflation and the average inflation rate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 57-85, January.
    14. Dotsey, Michael & Ireland, Peter, 1996. "The welfare cost of inflation in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 29-47, February.
    15. Gregory D. Hess & Charles S. Morris, 1996. "The long-run costs of moderate inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 71-88.
    16. Marquis, Milton H & Reffett, Kevin L, 1994. "New Technology Spillovers into the Payment System," Economic Journal, Royal Economic Society, vol. 104(426), pages 1123-38, September.
    17. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
    18. Bev Dahlby, 1992. "Price Adjustment in an Automobile Insurance Market: A Test of the Sheshinski-Weiss Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 564-83, August.
    19. William Roberds, 1994. "Changes in payments technology and the welfare cost of inflation," Economic Review, Federal Reserve Bank of Atlanta, issue May, pages 1-12.
    20. Samantha Johnson, 1993. "The costs of inflation revisited," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, March.
    21. Robert J. Shiller, 1996. "Why Do People Dislike Inflation?," NBER Working Papers 5539, National Bureau of Economic Research, Inc.
    22. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
    23. CHARLES T. Carlstrom & WILLIAM T. Gavin, 1993. "Zero Inflation: Transition Costs And Shoe Leather Benefits," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 9-17, 01.
    24. Marta Campillo & Jeffrey A. Miron, 1997. "Why Does Inflation Differ across Countries?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 335-362 National Bureau of Economic Research, Inc.
    25. Christopher J. Neely & Christopher J. Waller, 1997. "A Benefit-Cost Analysis Of Disinflation," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 50-64, 01.
    26. Darrel Cohen & Kevin A. Hassett & R. Glenn Hubbard, 1997. "Inflation and the User Cost of Capital: Does Inflation Still Matter?," NBER Working Papers 6046, National Bureau of Economic Research, Inc.
    27. Duguay, Pierre, 1994. "Empirical evidence on the strength of the monetary transmission mechanism in Canada: An aggregate approach," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 39-61, February.
    28. Eytan Sheshinski & Yoram Weiss, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 287-303.
    29. John Ammer, 1994. "Inflation, inflation risk, and stock returns," International Finance Discussion Papers 464, Board of Governors of the Federal Reserve System (U.S.).
    30. Crosby, Mark & Otto, Glenn, 2000. "Inflation and the Capital Stock," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 236-53, May.
    31. Norman Cameron & Derek Hum & Wayne Simpson, 1996. "Stylized Facts and Stylized Illusions: Inflation and Productivity Revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 152-62, February.
    32. Laurence Ball & Stephen G. Cecchetti, 1990. "Inflation and Uncertainty at Long and Short Horizons," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 215-254.
    33. Haslag, Joseph H, 1998. "Monetary Policy, Banking, and Growth," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 489-500, July.
    34. Michael F. Bryan & Stephen G. Cecchetti, 1996. "Inflation and the Distribution of Price Changes," NBER Working Papers 5793, National Bureau of Economic Research, Inc.
    35. Greenwood, Jeremy & Huffman, Gregory W., 1987. "A dynamic equilibrium model of inflation and unemployment," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 203-228, March.
    36. Douglas Laxton & Guy M Meredith & David Rose, 1994. "Asymmetric Effects of Economic Activityon Inflation; Evidence and Policy Implications," IMF Working Papers 94/139, International Monetary Fund.
    37. Laurence Ball & N. Gregory Mankiw, 1994. "A sticky-price manifesto," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
    38. Lavoie, C., 1995. "Fluctuations economiques dans un environnment de stabilite des prix," Working Papers-Department of Finance Canada 1995-1, Department of Finance Canada.
    39. Ruth Judson & Athanasios Orphanides, 1996. "Inflation, volatility and growth," Finance and Economics Discussion Series 96-19, Board of Governors of the Federal Reserve System (U.S.).
    40. Stanley Fischer, 1991. "Growth, Macroeconomics, and Development," NBER Working Papers 3702, National Bureau of Economic Research, Inc.
    41. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-20, September.
    42. Christina D. Romer, 1996. "Inflation and the Growth Rate of Output," NBER Working Papers 5575, National Bureau of Economic Research, Inc.
    43. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," Papers 88-05, Rochester, Business - General.
    44. Daniel L. Thornton, 1996. "The costs and benefits of price stability: an assessment of Howitt's rule," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 23-38.
    45. Fischer, S., 1991. "Growth, Macroeconomics, and Development," Working papers 580, Massachusetts Institute of Technology (MIT), Department of Economics.
    46. Clark, Todd E, 1997. "Cross-country Evidence on Long-Run Growth and Inflation," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 70-81, January.
    47. Grimes, Arthur, 1991. "The effects of inflation on growth: some international evidence," MPRA Paper 68526, University Library of Munich, Germany.
    48. Laurence Ball, 1990. "Why Does High Inflation Raise Inflation Uncertainty?," NBER Working Papers 3224, National Bureau of Economic Research, Inc.
    49. V. V. Chari & Larry E. Jones & Rodolfo E. Manuelli, 1995. "The growth effects of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 18-32.
    50. Gillman, Max, 1993. "The welfare cost of inflation in a cash-in-advance economy with costly credit," Journal of Monetary Economics, Elsevier, vol. 31(1), pages 97-115, February.
    51. R. F. Lucas, 1989. "The Bank of Canada and Zero Inflation: A New Cross of Gold?," Canadian Public Policy, University of Toronto Press, vol. 15(1), pages 84-93, March.
    52. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
    53. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
    54. Devereux, Michael, 1989. "A Positive Theory of Inflation and Inflation Variance," Economic Inquiry, Western Economic Association International, vol. 27(1), pages 105-16, January.
    55. Robson, Arthur J & Wooders, Myrna, 1997. "On the Growth-Maximizing Distribution of Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 511-26, August.
    56. Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
    57. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 341-374.
    58. Ales Bulir & Anne Marie Gulde, 1995. "Inflation and Income Distribution; Further Evidenceon Empirical Links," IMF Working Papers 95/86, International Monetary Fund.
    59. Hess, Gregory D. & Shin, Kwanho, 1999. "Some Intranational Evidence On Output-Inflation Trade-Offs," Macroeconomic Dynamics, Cambridge University Press, vol. 3(02), pages 187-203, June.
    60. Prakash Loungani & Phillip Swagel, 1995. "Supply-side sources of inflation: evidence from OECD countries," International Finance Discussion Papers 515, Board of Governors of the Federal Reserve System (U.S.).
    61. Martin Evans & Paul Wachtel, 1993. "Inflation regimes and the sources of inflation uncertainty," Proceedings, Federal Reserve Bank of Cleveland, pages 475-520.
    62. 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.
    63. Daniel Tsiddon, 1993. "The (Mis)Behaviour of the Aggregate Price Level," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 889-902.
    64. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May.
    65. Caporale, Tony & McKiernan, Barbara, 1997. "High and variable inflation: Further evidence on the Friedman hypothesis," Economics Letters, Elsevier, vol. 54(1), pages 65-68, January.
    66. Fischer, Stanley, 1981. "Towards an understanding of the costs of inflation: II," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 5-41, January.
    67. Cosimano, Thomas F & Jansen, Dennis W, 1988. "Estimates of the Variance of U.S. Inflation Based upon the ARCH Model: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 409-21, August.
    68. Alvin L. Marty & Daniel L. Thornton, 1995. "Is there a case for "moderate" inflation?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 27-38.
    69. Zarnowitz, Victor & Lambros, Louis A, 1987. "Consensus and Uncertainty in Economic Prediction," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 591-621, June.
    70. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 245-274.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bca:bocatr:83. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.