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Working Paper No. 185 | March 1997

Disinflationary Monetary Policy and the Distribution of Income

Some economists and others argue that, despite years of low inflation, a further decrease in the rate of price growth would be beneficial by reducing the dead-weight losses created by inflation-induced distortions. According to Research Associate Willem Thorbecke, of George Mason University, such arguments fail to consider the costs and benefits of changes in the distribution of income arising from deflationary policies. In this working paper, he examines the relative costs and benefits of such policies for firms (by size and sector) and workers (by income group and race).


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