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Zero Inflation: Transition Costs And Shoe Leather Benefits

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  • CHARLES T. Carlstrom
  • WILLIAM T. Gavin

Abstract

The idea that the monetary authority cannot achieve price stability except at the cost of a recession is the most common and convincing argument against price stability. This paper presents calculations showing that the resource costs of a recession that might result from eliminating a 4 percent inflation are approximately equal to the “shoe leather” costs incurred when inflation is stable at 4 percent.

Suggested Citation

  • CHARLES T. Carlstrom & WILLIAM T. Gavin, 1993. "Zero Inflation: Transition Costs And Shoe Leather Benefits," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 9-17, January.
    • Handle: RePEc:bla:coecpo:v:11:y:1993:i:1:p:9-17
    DOI: 10.1111/j.1465-7287.1993.tb00367.x
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    Cited by:

    1. Brian O'Reilly, 1998. "The Benefits of Low Inflation: Taking Shock "A nickel ain't worth a dime any more" [Yogi Berra]," Technical Reports 83, Bank of Canada.
    2. Michael R. Pakko, 1998. "Shoe-leather costs of inflation and policy credibility," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 37-50.
    3. David E. Altig, 1992. "An ebbing tide lowers all boats: monetary policy, inflation, and social justice," Economic Review, Federal Reserve Bank of Cleveland, vol. 28(Q II), pages 14-22.
    4. Max Gillman, 1995. "Comparing Partial And General Equilibrium Estimates Of The Welfare Cost Of Inflation," Contemporary Economic Policy, Western Economic Association International, vol. 13(4), pages 60-71, October.
    5. Christopher Ragan, 1998. "On the Believable Benefits of Low Inflation," Staff Working Papers 98-15, Bank of Canada.
    6. Dotsey, Michael & Ireland, Peter, 1996. "The welfare cost of inflation in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 29-47, February.

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