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Some costs and benefits of price stability in the UK

  • Hasan Bakhshi
  • Andrew Haldane
  • Neal Hatch

This paper quantifies some of the costs of inflation in the United Kingdom. It focuses in particular on inflation distortions under an imperfectly indexed tax system and distortions to money demand. In the United States, an earlier study by Feldstein found that lowering inflation by 2 percentage points could generate welfare benefits of as much as 1% of GDP per year forever. In the United Kingdom, the benefits are found to be smaller, but still substantial, at 0.2% of GDP per year.

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Paper provided by Bank of England in its series Bank of England working papers with number 78.

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Date of creation: Mar 1998
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Handle: RePEc:boe:boeewp:78
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