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How Costly Is Sustained Low Inflation for the U.S. Economy? (ICPSR 1302)
Principal Investigator(s): Bullard, James B., Federal Reserve Bank of St. Louis; Russell, Steven, University of Indiana, Purdue University
The authors study the welfare cost of inflation in a general equilibrium life-cycle model that includes households that live for many periods, production and capital, simple monetary and financial sectors, and a fairly elaborate government sector. The government's taxation of capital income is not indexed for inflation. They find that a plausibly calibrated version of this model has a steady state that matches a variety of facts about the postwar U.S. economy. They use the model to estimate the welfare cost of permanent, policy-induced changes in the inflation rate and find that most of the costs of inflation are direct and indirect consequences of the fact that inflation increases the effective tax rate on capital income. The cost estimates are an order of magnitude larger that other estimates in the literature.
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Bullard, James B., and Steven Russell. How Costly Is Sustained Low Inflation for the U.S. Economy?. ICPSR01302-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2004-08-12. http://doi.org/10.3886/ICPSR01302.v1
Persistent URL: http://doi.org/10.3886/ICPSR01302.v1
Scope of Study
Geographic Coverage: United States
Data Collection Notes:
The file submitted is the program file 0405jbp.prg. These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.
Original ICPSR Release: 2004-08-12
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