29,565 research outputs found

    How costly is sustained low inflation for the U.S. economy?

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    We study the welfare cost of inflation in a general equilibrium life cycle model with growth, costly financial intermediation, and taxes on nominal quantities. We find a stationary equilibrium of the model matches a wide variety of facts about the postwar U.S. economy. We then calculate that the inflation policy of the monetary authority has welfare consequences for agents that are an order of magnitude larger than existing estimates in the literature. These effects are large even at very low inflation rates. The bulk of the welfare cost of inflation can be attributed to the fact that inflation increases the effective tax rate on capital income.Economic conditions - United States ; Inflation (Finance)

    How costly is sustained low inflation for the U.S. economy?

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    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 than other estimates in the literature.Economic conditions - United States ; Inflation (Finance)

    Contract Theory and the Moderation for Inflation by Recession and by Controls

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    macroeconomics, contract theory, inflation, recession

    Monetary Neutrality

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    Prize Lecture to the memory of Alfred Nobel, December 7, 1995.Money neutrality;

    A Quick Refresher Course in Macroeconomics

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    This paper presents a non-technical discussion of some of the important developments in macroeconomics over the past twenty years. It considers three broad categories of research. First, it discusses how the notion of rational expectations has affected economists' views on the role of economic policy, the debate over rules versus discretion, and empirical work in macroeconomics Second, it discusses various new classical approaches to the business cycle, including imperfect information theories, real business cycle theories, and sectoral shift theories. Third, it discusses various new Keynesian approaches to the business cycle, includes theories based on general disequilibrium, labor contracting, and menu costs.

    A Two-Warehouse Model for Deteriorating Items with Holding Cost under Particle Swarm Optimization

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    A deterministic inventory model has been developed for deteriorating items and Particle Swarm Optimization (PSO) having a ramp type demands with the effects of inflation with two-warehouse facilities. The owned warehouse (OW) has a fixed capacity of W units; the rented warehouse (RW) has unlimited capacity. Here, we assumed that the inventory holding cost in RW is higher than those in OW. Shortages in inventory are allowed and partially backlogged and Particle Swarm Optimization (PSO) it is assumed that the inventory deteriorates over time at a variable deterioration rate. The effect of inflation has also been considered for various costs associated with the inventory system and Particle Swarm Optimization (PSO). Numerical example is also used to study the behaviour of the model. Cost minimization technique is used to get the expressions for total cost and other parameters

    Rational Expectations in the Macro Model

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    macroeconomics, macro model
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