NBER Working Papers and Publications
|January 1999||Some Costs and Benefits of Price Stability in the United Kingdom|
with Hasan Bakhshi, Andrew Haldane
in The Costs and Benefits of Price Stability, Martin Feldstein, editor
|July 1998||Some Costs and Benefits of Price Stability in the United Kingdom|
with Hasan Bakhshi, Andrew G. Haldane: w6660
In a previous attempt to articulate the costs of inflation (Leigh-Pemberton (1992)), the Bank of England outlined the following costs of a fully-anticipated inflation: - the cost of economising on real money balances -- so-called shoe-leather' effects; - the costs of operating a less-than-perfectly indexed tax system; - the costs of front-end loading' of nominal debt contracts; - the cost of constantly revising price lists -- so called menu costs' Feldstein (1996) quantified the first two of these costs when moving from 2% inflation to price stability in the U.S. Feldstein concluded that the permanent welfare gains through these two channels -- suitably discounted -- alone exceeded the transient costs of doing so. This paper aims to replicate Feldstein's analysis for the U.K. Welfare eff...