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

40 Pages Posted: 21 Mar 2001

See all articles by Joseph E. Stiglitz

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: July 1980

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.

Suggested Citation

Stiglitz, Joseph E., On the Almost Neutrality of Inflation: Notes on Taxation and the Welfare Costs of Inflation (July 1980). NBER Working Paper No. w0499. Available at SSRN: https://ssrn.com/abstract=263381

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