Towards an understanding of the real effects and costs of inflation

Zusammenfassung Zum Verst?ndnis der realen Wirkungen und Kosten der Inflation. — Die traditionelle Ansicht, da\ eine Inflation, weil Geld neutral ist, keine nennenswerten realen Wirkungen hervorbringt, erweist sich nur für eine Volkswirtschaft als ann?hernd richtig, deren Regelungen vollst?ndig inflationssicher sind, d. h. für eine vollindexierte Wirtschaft. Die Realwirkungen erweisen sich aber als um so verbreiteter und schwererwiegend, je mehr bei wirtschaftlichen Regelungen Nominalwerte verwendet werden. Der Aufsatz untersucht nacheinander die Folgen von amtlichen Regelungen auf Nominalbasis (Steuersystem, Definition des steuerpflichtigen Einkommens, Buchführungsmethoden), von privaten Einrichtungen und übereinkünften auf Nominalbasis (Hypotheken, Rentenvertr?ge, Einkommensberechnungen), selbst für den Fall, da\ die Inflation vollst?ndig antizipiert wird bzw. wurde. Anschlie\end werden die Wirkungen einer nicht antizipierten Inflation geprüft, die in den bestehenden nominalen langfristigen Vertr?gen nicht berücksichtigt worden ist, und die Wirkungen einer Ungewissen zukünftigen Inflation. Soweit es m?glich ist, wird versucht, die sozialen Kosten von verschiedenen Realwirkungen abzusch?tzen, obwohl es zur Zeit nicht m?glich ist, die allgemeinen sozialen Kosten der Inflation zu ermitteln.

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Résumé Vers une compréhension des effets réels et des co?t d’inflation. — Nous démontrons que la vue traditionelle d’après laquelle l’inflation ne produit pas des effets réels appréciables à cause de la neutralité d’argent est valide pour une économie seulement dont les institutions sont complètement étanche à l’inflation, c’est-à-dire il s’agit d’une économie indexée. Mais nous démontrons que les effets réels deviennent plus et plus diffusés et sérieux comme les institutions de l’économie deviennent presque plus nominales. L’article examine succédamment les conséquences des institutions nominales de gouvernement (le système fiscal, la définition de revenu taxable, la procédure comptable); des institutions privées nominales et des conventions comptables (les contrats de hypothèque et d’annuité, le mesurage de revenu), même si l’inflation est, et a été complètement anticipée. En plus l’article examine les effets de l’inflation pas anticipée et pas incorporée dans les contrats nominaux existants à long terme, et de l’inflation future incertaine. S’il est possible, nous entreprenons l’effort de fixer les co?t sociaux des effets réels différents même bien qu’il ne soit pas possible au moment présent de fixer tous les co?t sociaux de l’inflation.

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Resumen Hacia el entendimiento de los verdaderos efectos y costos de la inflatión. — La visión tradicional que la inflatión no produce efectos reales apreciables debido a que el dinero es neutral, es solamente válida en forma aproximada para una economía cuyas instituciones están completamente a prueba de inflatión, p.ej. una economía completamente indexada. Pero se muestra que los verdaderos efectos se generalizarán más y más y serán más serios en la medida que las instituciones de la economía sean más cercanamente nominales. El artículo examina en forma sucesiva las consecuencias de instituciones gubernamentales nominales (sistema de impuestos, definitión del ingreso imponible, procedimientos contables); de instituciones privadas nominales y convenciones contables (hipotecas y contratos de renta anuales, medición del ingreso), incluso cuando la inflatión es y ha sido totalmente anticipada. Examina en seguida los efectos de inflatión no anticipados, que no han sido incoirporados dentro de los contratos de largo plazo existentes, y de inflatión futura incierta. En los casos que fue posible, se hizo un esfuerzo por determinar el costo social de varios efectos reales, aunque en este momento no es posible apreciar los costos sociales totales de la inflatión.

     

Recent developments in monetary theory

This paper surveys recent work in monetary theory, with primary emphasis on material that has appeared since the writing of Harry Johnson's 1962 survey. The discussion deals with the following topics: (1) the theory of money demand, with special attention to inventory approaches; (2) money, inflation and growth; (3) the welfare cost of inflation, the optimum quantity of money, and inflationary finance; (4) disequilibrium theory; (5) the general equilibrium approach to monetary theory; (6) the new microfoundations of money; and (7) rational expectations and the Phillips Curve.     

REAL INCOME LEVELS IN LATIN AMERICA

The measurement and inter-spatial comparison of Latin American real income levels calls for techniques which depart substantially from the conventional procedure of applying such official or free market exchange rates as happen to prevail in any given period. The reasons are varied, the main ones being that in an area such as Latin America prices are notoriously volatile, their structure differs radically from that encountered in other parts of the world, and the exchange rate system is characterized by frequent and usually irregular revisions, while in certain countries a multiple exchange rate system applies and no single factor is available for conversion purposes. In addition, there exists the problem common to all developing countries that the rates to a large extent reflect the exchange value of a limited number of export commodities vis-à-vis a wide range of imported goods and in no way typify the internal-external price relationship for the bulk of production which by its nature fails to enter into international trading transactions.
The author has endeavoured to circumvent these difficulties by adopting the often-discussed "purchasing power parity" approach whereby national accounts data are converted into a common monetary denominator (in this case, the U.S. dollar) expressed in "real" or quantitative terms which as far as possible eliminate inter-spatial price differences. Results are presented and analyzed, first for the base year 1960, and then for the period 1955–1964 at the level of main expenditure sectors as well as for the total gross domestic product.
To the extent that available statistics permitted, results for Latin American countries are also related to the United States and certain countries in Western Europe, a main objective being to determine the approximate dimension of the incomes "gap" and to ascertain whether this is increasing, decreasing or remaining very much unchanged in size.     

Do departures from democratic accountability compromise the stability of public finances? Keynesianism, central banking, and minority governments in the Canadian system of party government, 1867–2009

This paper is concerned with the effectiveness of Westminster parliamentary institutions in ensuring the stability of a nation??s public finances. Our starting point and major hypothesis is that the governance structure embodied in Canada??s parliamentary system has contributed importantly to the maintenance of fiscal stability. The fact that the Government of Canada, like the central government of many other modern democracies, has survived for over a century without default on its public debt means that in some meaningful sense, long run responsibility with respect to the nation??s finances has in fact been achieved, and we show that this is in fact the case. Hence a more meaningful test of our main hypothesis requires the designation of specific sub-periods when the ideological background for political policy making changed and/or when the institutions and organizations for operationalizing policy varied in ways that either improved or discouraged responsible fiscal performance. We consider ideational and institutional factors that are predicted to either enhance or detract from accountability and fiscal stability, including central banking, the adoption of Keynesianism, inflation targeting and periods of minority government, and test for their effects on long run stability of the debt to GDP ratio using data for almost the entire history of the modern state from 1867 to 2008.