On the Almost Neutrality of Inflation: Notes on Taxation and the Welfare Costs of Inflation

Joseph Stiglitz

No 499, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper I attempt to clarify the nature of the losses associated with inflation within a conventional model of a competitive economy. I shall argue that were inflation fully anticipated, it would be "almost neutral" provided (a) that the tax system were fully indexed and (b) that interest were paid on bank deposits (as to an increasing extent it is in the United States). However, unanticipated inflation may have significant effects.

Date: 1980-07
Note: PE
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Published as Stiglitz, Joseph E. "On the Almost Neutrality of Inflation: Notes on Taxation and the Welfare Costs of Inflation." Development in an Inflationary World, edited by M. June Flanders and Assaf Razin, pp. 419-457. New York: Academic Press, Inc., 1981.

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