The Deleterious Effects Of Inflation On Capital Formation
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IMF Staff Papers
| Author | : International Monetary Fund. Research Dept. |
| Publisher | : International Monetary Fund |
| Total Pages | : 229 |
| Release | : 1963-01-01 |
| Genre | : Business & Economics |
| ISBN | : 1451956029 |
This paper discusses effects of inflation on economic development. A mild inflation may well encourage little, or no, evasion of the “inflation tax.” On the other hand, a strong inflation, and frequently a mild one also, will lead to community reactions which have effects like those of widespread tax evasion. A development policy may have wider aims than the encouragement of a high level of investment. Inflation has two effects on the desire for liquidity, which are related to the two basic reasons why individuals and businesses wish to hold liquid assets—the speculative and precautionary motives. Inflation increases the value of effective liquidity, thereby raising the community's desire for it, but it makes the most generally accepted store of liquidity unacceptable sources of protection. The control of inflation is only one of the problems facing a government wishing to encourage rapid economic development. The fight against illiteracy, the reform of bureaucratic practices, the building of basic sanitary facilities for the eradication of endemic diseases, the substitution of competitive for monopolistic trade practices, the encouragement of a widespread spirit of entrepreneurship, and the creation of an adequate amount of social capital, may be important prerequisites for rapid growth.
The Effect of Inflation on Capital Formation in Agriculture
| Author | : L.R. Graca |
| Publisher | : |
| Total Pages | : 135 |
| Release | : 1983 |
| Genre | : |
| ISBN | : |
The major objetive addressed by this research was to estimate the effect of inflation on tractor sales in U.S. agriculture. To attain this objective, two vestor-autoregressive models of quarterly tractor sales were cenceptualized and estimated. The first model included the inflation rate as an explicit variable. Additional variables in the model include: tractor sales, real income, and real annual cost of tractors. The second model also included four variables: tractor sales, real income, an index of real cash flow, and an index of implicit real rental price of tractors taking income taxes into account. The second model was conceptualized in order to estimate the specific effects of inflation though the variables by tax laws (depreciation shield, real after-tax interest rate, and investment tax credit) and through the effects on cash flows. For both models, the following statistical procedures were performed: 1) a causality test; 2) the impulse response of tractor sales to shocks in other variables; 3) a forecast error variance decomposition; and 4) a historical decomposition of variance. Results for the first model found that inflation was a significant variable explaining tractor sales for the period 1961Q3-1982Q2. However, tractor sales found to be more sensitive to actual past changes in real annual cost and real income than to inflation. Results for the second model found a theoretically inconsistent causation (positive instead of negative) running from implicit rental price index to tractor sales. This result was a barrier to delineating the effect of inflation through tax laws. The real cash flow index (which increases with inflation) was the most important variable in explaining tractor sales for above period. The study concluded that inflation had a negative effect on tractor sales during the period 1961Q3-1982Q2. The magnitude of these effects were smaller than those from real annual cost and real income. The particular negative effect of inflation through cash flow stress might be an important factor concerning capital formation in agriculture. The importance of the reduced value of depreciation income-tax shield and lower real after-tax cost of capital as caused by inflation was not confirmed.
Inflation and Monetary Policy in the United States - Their Effect Upon the Capital Formation Process
| Author | : Gordon Douglas Brooks |
| Publisher | : |
| Total Pages | : 232 |
| Release | : 1975 |
| Genre | : Saving and investment |
| ISBN | : |
The Supply-Side Effects of Economic Policy
| Author | : L.H. Meyer |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 269 |
| Release | : 2012-12-06 |
| Genre | : Business & Economics |
| ISBN | : 9400981740 |
On October 24 and 25, 1980, the Center for the Study of American Business at Washington University and the Federal Reserve Bank of St. Louis cosponsored their fifth annual conference, "The Supply-Side Effects of Economic Policy." This volume contains the papers and comments delivered at that conference. Proponents of "supply-side economics" have challenged the policy recommendations that emerge from "Keynesian" macroeconometric models. These models focus on the effects of economic policy on the demand for output. Supply-side economics, in contrast, emphasizes the response of output to changes in the supply of inputs. Decisions affecting the capital stock and employment-in particular, saving and investment decisions and labor force participation and hours decisions-are the focus of the supply-siders' attention. The 1980 conference examined most of the major themes associated with supply-side economics. The papers in Part I of this volume develop the theory underlying various supply-side propositions and present empirical evidence in support of some of these propositions. In Part II, the effect of taxes on capital formation and the effect of increased capital formation on output growth and inflation are examined. The effect of tax and transfer programs on labor supply, employment and unemployment are examined in Part III. The final section contains the special luncheon and dinner presentations.
The Costs and Benefits of Price Stability
| Author | : Martin Feldstein |
| Publisher | : University of Chicago Press |
| Total Pages | : 374 |
| Release | : 2007-12-01 |
| Genre | : Business & Economics |
| ISBN | : 0226241769 |
In recent years, the Federal Reserve and central banks worldwide have enjoyed remarkable success in their battle against inflation. The challenge now confronting the Fed and its counterparts is how to proceed in this newly benign economic environment: Should monetary policy seek to maintain a rate of low-level inflation or eliminate inflation altogether in an effort to attain full price stability? In a seminal article published in 1997, Martin Feldstein developed a framework for calculating the gains in economic welfare that might result from a move from a low level of inflation to full price stability. The present volume extends that analysis, focusing on the likely costs and benefits of achieving price stability not only in the United States, but in Germany, Spain, and the United Kingdom as well. The results show that even small changes in already low inflation rates can have a substantial impact on the economic performance of different countries, and that variations in national tax rules can affect the level of gain from disinflation.
Fiscal Policies, Inflation and Capital Formation
| Author | : Martin S. Feldstein |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
Three ways of averting "excess saving" have been emphasized in both theory and practice. The thrust of the Keynesian prescription was to increase the government deficit to provide demand for the resources that would not otherwise be used for either consumption or investment. In this way, aggregate demand would be maintained by substituting public consumption for private consumption. A second alternative prescription was to reduce the private saving rate. Early Keynesians like Seymour Harris saw the new Social Security program as an effective way to reduce aggregate saving. The third type of policy, developed by JamesTobin, relies on increasing the rate of inflation and making money less attractive relative to real capital. In Tobin's analysis, the resulting increase in capital intensity offsets the higher saving rate and therefore maintains aggregate demand. This paper will examine ways of increasing capital intensity without raising the rate of inflation. The analysis will also show why, contrary to Tobin's conclusion, a higher rate of inflation may not succeed in increasing investors' willingness to hold real capital.
Inflation
| Author | : Robert E. Hall |
| Publisher | : University of Chicago Press |
| Total Pages | : 302 |
| Release | : 2009-05-15 |
| Genre | : Business & Economics |
| ISBN | : 0226313255 |
This volume presents the latest thoughts of a brilliant group of young economists on one of the most persistent economic problems facing the United States and the world, inflation. Rather than attempting an encyclopedic effort or offering specific policy recommendations, the contributors have emphasized the diagnosis of problems and the description of events that economists most thoroughly understand. Reflecting a dozen diverse views—many of which challenge established orthodoxy—they illuminate the economic and political processes involved in this important issue.
