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


  • Juan J. Dolado
  • José M. González-Páramo
  • José Viñals


One of the most significant economic developments of recent years in industrialized countries has been the increasing orientation of macroeconomic policies - and of monetary policies in particular - to achieving lower inflation rates. This has led to a move from low inflation to price stability in a number of countries and, in particular, in Spain. The purpose of this paper is to provide some empirical evidence on the net economic gains that have been obtained in the case of Spain from achieving inflation rates which are low enough to be considered consistent with a situation of price stability.

Suggested Citation

  • Juan J. Dolado & José M. González-Páramo & José Viñals, 1997. "A Cost-Benefit Analysis of Going from Low Inflation to Price Stability in Spain," Working Papers 9728, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:9728

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    References listed on IDEAS

    1. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters,in: Monetary Policy, pages 155-193 National Bureau of Economic Research, Inc.
    2. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor, 2001. "Does inflation matter for growth?," Japan and the World Economy, Elsevier, vol. 13(4), pages 405-428, December.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. José Manuel González-Páramo, 1991. "Imposición personal e incentivos fiscales al ahorro en España," Estudios Económicos, Banco de España;Estudios Económicos Homepage, number 46.
    9. 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.
    10. 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 128-138, March.
    11. 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.
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    Cited by:

    1. Leo Bonato, 1998. "The benefits of price stability: some estimates for New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 61, September.
    2. Dolado, Juan José & López-Salido, J. David & Vega, Juan Luis, 1997. "Spanish unemployment and inflation persistence : ares there phillips trade-offs?," UC3M Working papers. Economics 6041, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Armando Méndez Morales, 1998. "Determinants of Growth in an Error; Correction Model for El Salvador," IMF Working Papers 98/104, International Monetary Fund.
    4. José Manuel González Páramo, 2003. "Midiendo el coste marginal en bienestar de una reforma impositiva," Hacienda Pública Española, IEF, vol. 166(3), pages 115-147, September.
    5. Nicolas Sobczak, 1998. "Disinflation in Spain; The Recent Experience," IMF Working Papers 98/106, International Monetary Fund.
    6. Wynne, Mark A., 2008. "How should central banks define price stability?," Globalization and Monetary Policy Institute Working Paper 08, Federal Reserve Bank of Dallas.
    7. Blaszkiewicz, Monika & Konieczny, Jerzy & Myslinska, Anna & Radziwil, Artur & Przemyslaw, Wozniak, 2002. "Some benefits of reducing inflation in transition economies," BOFIT Discussion Papers 16/2002, Bank of Finland, Institute for Economies in Transition.
    8. Ferran Sancho, 2004. "Una estimación del coste marginal en bienestar del sistema impositivo en España," Hacienda Pública Española, IEF, vol. 169(2), pages 117-132, June.
    9. Antonio Sánchez Soliño, 2012. "Optimización de la transferencia de riesgos en los Contratos de Infraestructuras y Servicios Públicos," Hacienda Pública Española, IEF, vol. 201(2), pages 67-91, June.
    10. Jorge Martínez Pagés & Luis Ángel Maza, 2003. "Analysis of house prices in Spain," Working Papers 0307, Banco de España;Working Papers Homepage.
    11. Manuel Balmaseda & Miguel Sebastián & Patry Tello, 2002. "Spain Accession to the EMU - A Long and Hilly Road," The Economic and Social Review, Economic and Social Studies, vol. 33(2), pages 195-222.

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis


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