Inflation and Welfare: Comment on Robert Lucas / Hans-Werner Sinn.

Format:

Book

Author/Creator:

Sinn, Hans-Werner.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6979.

NBER working paper series no. w6979

Language:

English

Subjects (All):

Inflation (Finance)--Econometric models.

Inflation (Finance).

Interest rates Econometric models.

Interest rates.

Taxation--Econometric models.

Taxation.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Inflation and Welfare

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Cambridge, Mass. : National Bureau of Economic Research, 1999.

Summary:

The paper argues that Lucas overestimates the Friedman-Bailey type of welfare cost of inflation and neglects other important welfare effects. With an alternative interpretation of the non-observability of low interest rates than the one Lucas gave and the introduction of taxes that reduce the opportunity cost of money holding, the welfare cost shrinks to one third of Lucas' estimate. The neglected welfare effects of inflation include an adverse Baumol-Tobin effect on growth and international capital movements, historical cost accounting for tax purposes, uncertainty about the price level and the relationship between inflation, relative prices and structural change.

Notes:

Print version record

February 1999.