How Costly Is Sustained Low Inflation for the U.S. Economy? (ICPSR 1302)

Version Date: Aug 12, 2004

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Principal Investigator(s):
James B. Bullard, Federal Reserve Bank of St. Louis; Steven Russell, University of Indiana, Purdue University

https://doi.org/10.3886/ICPSR01302.v1

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Summary

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.

Citation

Bullard, James B., and Russell, Steven. How Costly Is Sustained Low Inflation for the U.S. Economy? Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2004-08-12. https://doi.org/10.3886/ICPSR01302.v1

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Distributor(s)

Inter-university Consortium for Political and Social Research
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Data Collection Notes

  1. 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.

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Original Release Date

2004-08-12

Version History

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:
  • 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
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Notes

  • These data are flagged as replication datasets 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.

  • The public-use data files in this collection are available for access by the general public. Access does not require affiliation with an ICPSR member institution.