How should central banks reduce inflation? - Conceptual issues

In remarks made before the Federal Reserve Bank of Kansas City's 1996 symposium, Achieving Price Stability, Mr. King discussed how quickly a central bank should reduce inflation to its desired level following an inflationary episode. He argued that a central bank is unlikely to wish to move immediately to price stability, since there are costs to disinflation and these costs increase more than proportionally with the rate of disinflation. These costs, which arise because economic agents have to learn about the central bank's commitment to price stability, also mean that a central bank may wish to react to shocks to output as well as to inflation. But Mr. King stressed that any such response should be cautious in the period in which the private sector is still learning about the central bank's commitment to price stability.Banks and banking, Central ; Inflation (Finance)

Monetary policy in the UK

I was delighted to be asked to give the IFS Annual Lecture for 1994, not least because of my own connections with the Institute. These began with my participation in the meetings of IFS, and continued as a member of the Meade Committee in the 1970s. The work of that Committee — led by James Meade and Donald Ironside — proved to be one of the formative experiences of my professional career and led to my collaboration with John Kay on our book, The British Tax System. The Meade Committee Report represented a turning-point in the history of IFS, and since then it has gone from strength to strength under the successive leadership of Dick Taverne, John Kay, Bill Robinson and, now, Andrew Dilnot. I would like to take this opportunity to welcome the recent initiative to set up a Tax Law Review Committee. I know that IFS is seeking 50 sponsors to underwrite this venture, and I am happy to announce this evening that the Bank will be one of those 50.

An Index of Inequality: With Applications to Horizontal Equity and Social Mobility

An index of Inequality is constructed which decomposes into two components, corresponding to vertical and "horizontal" equity respectively. Horizontal equity Is defined in terms of changes in the ordering of a distribution. The proposed index is a function to two inequality aversion parameters. One empirical application is for comparison of a pre-tax distribution with a post-tax distribution, and an example of this is given for the distribution of incomes in the UK in 1977. There is a trade-off between "horizontal"and vertical equity, and for particular combinations of the inequality aversion parameters the original distribution will be preferred to the final distribution. The paper concludes with an application of the proposed index to a model of optimal taxation.

The Cash Flow Corporate Income Tax

The current debate on tax reform has raised again the question of how the corporate tax system should be altered. The cumulative effect of piece meal changes to the tax system has been to produce major distortions in the pattern of savings and investment and falling revenue in real terms. To overcome these problems, reform, both in the US and UK, has focussed on ways to tax the real economic income of companies. The main problems with this approach are the difficulties of (a) indexing the tax treatment of income from capital in a comprehensive manner and (b) defining economic depreciation. This paper discusses and alternative way to obtain the objective of fiscal neutrality without a significant erosion of the tax base. The implications of such a cash flow corporate income tax for financial and investment decisions are discussed both theoretically and in terms of potential and administrative and practical problems of implementation.

Monetary policy strategies : a central bank panel

Greenspan, Alan ; Monetary policy ; Banks and banking, Central