Financial Inflation Research Articles

Kasgeld en kasbelegging

A restrictive monetary policy in the Netherlands is virtually a policy to adapt the pace of domestic inflation to the pace of inflation abroad. This aim is pursued by limiting the growth of transactions balances in case of a balance of payments deficit. Although in such circumstances the government uses to take recourse to inflationary financing, credit rationing and the rise of interest rates cause investment expenditures to slow down.

The Brazilian Stabilization Program, 1964-6

Previous articleNext article No AccessThe Brazilian Stabilization Program, 1964-6Alexandre KafkaAlexandre Kafka Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 75, Number 4, Part 2Aug., 1967Part 2: Issues in Monetary Research, 1966 Article DOIhttps://doi.org/10.1086/259337 Views: 4Total views on this site Citations: 13Citations are reported from Crossref Copyright 1967 The University of ChicagoPDF download Crossref reports the following articles citing this article:Mauro Boianovsky The Brazilian Connection in Milton Friedman’s 1967 Presidential Address and 1976 Nobel Lecture, History of Political Economy 52, no.22 (Jan 2020): 367–396.https://doi.org/10.1215/00182702-8173418Mauro Boianovsky The Brazilian Connection in Milton Friedman's 1967 Presidential Address and 1976 Nobel Lecture, SSRN Electronic Journal (Jan 2018).https://doi.org/10.2139/ssrn.3214899Mauro Boianovsky Celso Furtado and the Structuralist-Monetarist Debate on Economic Stabilization in Latin America, History of Political Economy 44, no.22 (Jun 2012): 277–330.https://doi.org/10.1215/00182702-1571719Guillermo A. Calvo, Carlos A. Végh Chapter 24 Inflation stabilization and bop crises in developing countries, (Jan 1999): 1531–1614.https://doi.org/10.1016/S1574-0048(99)10037-5Carlos A. Végh Gramont, Stopping High Inflation: An Analytical Overview, IMF Working Papers 91, no.107107 (Jan 1991): 1.https://doi.org/10.5089/9781451946727.001Dev Kar Government Deficits and Inflation in Brazil: The Experience During 1948-1964, SSRN Electronic Journal (Jan 1981).https://doi.org/10.2139/ssrn.1586933Werner Baer, Paul Beckerman The trouble with index-linking: Reflections on the recent Brazilian Experience, World Development 8, no.99 (Sep 1980): 677–703.https://doi.org/10.1016/0305-750X(80)90057-1Reuven Brenner The Concept of Indexation and Monetary Theory, History of Political Economy 11, no.33 (Sep 1979): 395–405.https://doi.org/10.1215/00182702-11-3-395Pedro S. Malan, Regis Bonelli The Brazilian economy in the seventies: Old and new developments, World Development 5, no.1-21-2 (Jan 1977): 19–45.https://doi.org/10.1016/0305-750X(77)90004-3Nicholas Georgescu-Roegen (1968) Structural Inflation-Lock and Balanced Growth11The general ideas presented below in Sections VII-IX formed the object of a number of public lectures and seminars given by the author in Brazil and Argentina during the summer of 1966. A preliminary version of the present paper was read at the annual meeting of the Southern Economic Association (November 18, 1967) and during 1968 at several faculty seminars in the United States. A short Portuguese version, “O Estrangulamento: Inflaçãb Estrutural e o Crescimento Econômico,” appeared in Revista Brazileira de Economia, XXII, No. 1 (March 1968), pp. 5–14.The author wishes to acknowledge also the help of his research assistants, Aly Alp Ercelawn and Ibrahim Eris, especially the former's tenacity in collecting and systematizing the statistical data from highly disparate sources., (Jan 1976): 149–197.https://doi.org/10.1016/B978-0-08-021027-8.50013-8 Donald A. Nichols Some Principles of Inflationary Finance, Journal of Political Economy 82, no.2, Part 12, Part 1 (Oct 2015): 423–430.https://doi.org/10.1086/260201 Donald L. Huddle Essays on the Economy of Brazil: The Berkeley Group, Economic Development and Cultural Change 20, no.33 (Oct 2015): 560–574.https://doi.org/10.1086/450576 Samuel A. Morley Inflation and Stagnation in Brazil, Economic Development and Cultural Change 19, no.22 (Oct 2015): 184–203.https://doi.org/10.1086/450478

Growth and the Welfare Cost of Inflationary Finance

T IS well known that inflationary finance allows the government to appropriate a share of real income, since a given rate of inflation is logically equivalent to an explicit tax on real cash balances (Friedman, 1953, pp. 251-62). Suppose the government announces it will induce a price rise of x per cent per annum, which people fully anticipate will occur. mere anticipation of inflation leads individuals to reduce their stock of real cash balances until the marginal productivity of a dollar held in the form of real cash balances is balanced against the real rate of interest foregone plus the rate of inflation-the sum of the two being equal, when inflation is fully anticipated, to the money rate of interest. real tax proceeds are equal to the stock of real balances people choose to hold after the inflation is announced multiplied by the rate of inflation. welfare loss to society can be measured by integrating the area under the liquidity preference schedule from the stock of real cash balances held at a zero rate of inflation to that held at the announced positive rate of inflation, since this area measures the total loss of the productivity of real cash balances foregone. ratio of the welfare loss to the tax proceeds in turn provides a measure of the efficiency of this form of taxation. traditional case against inflationary finance first presented by Martin Bailey in a classic article on The Welfare Cost of Inflationary Finance (Bailey, 1956) rests in the main on showing that a substantial volume of resources cannot be appropriated through in-

Growth, Stability, and Inflationary Finance

Growth, Stability, and Inflationary Finance

The Weight of Tax Revenue in the Pakistan Economy

This paper provides a general review of taxes in Pakistan with special reference to central government tax efforts. The weight of central taxes in national income and in the central budget is analysed using the tax data for the period 1948-62. Some suggestions are made about mobilizing more savings by raising tax revenues. The Case for Raising the Weight of Tax Revenue In the developing countries, we usually find a fiscal system where the relative weight of the public revenues in the total economy is meagre and limited to certain sectors. This state of affairs tends to make fiscal policy weak as well as blunt. As increasing the effectiveness of monetary policy in underdeveloped countries presupposes organization and wide dissemination of monetary institutions, so a prerequisite for an efficacious fiscal policy is enhancement of the influence of taxes in the economy1. Enhancement of the relative importance of taxation in the economy is essential for a number of reasons. First, the governments of the developing countries have to finance increasingly larger development programmes. The safe way to acquire the necessary resources is through taxes, as supply rigidities make flirtation with inflationary finance a dangerous game8. Second, power to tax brings with it the power to regulate. The government can perform its function of guiding the economy along the planned course without excessive reliance on direct controls only if it is adequately armed with effective tax powers which can touch any part of the economy accord¬ing to the need of circumstances. Third, built-in stabilizers and counter¬cyclical tax adjustments can successfully offset fluctuations in income and employment "where the ratio of taxes to national income is high, a large proportion of revenue is from net income taxes and there is a large foreign

The Welfare Cost of Inflationary Finance

IN RECENT years several governments have been tempted to resort to open inflation as a method of financing a desired diversion of resources to the government sector of the economy, because of the apparently painless character of this method of diversion. This temptation has not always been resisted in spite of the evidence from the past that this process is not so painless as it appears at first glance. On the other hand, most economists in this country have virtually taken it for granted that this method of finance is not desirable. In many cases the governments of other countries which desired to divert a substantial fraction of

The Ethics of Government Debt

When repudiation is forced upon a nation by events and conditions beyond its control no question of ethics is involved. A country engaged in a war that has drained away its resources and impoverished it, or a subjected country ruthlessly exploited by its conquerors, may be forced to repudiate its debt for want of means to support it. This is the public equivalent of honorable bankruptcy in private life. WTien, however, ignorance, indifference, neglect, and extravagance put a nation on the road to repudiation the ethics of borrowing and of debt have been violated. The high principle implied in the promise to pay, a promise without which no lender would have transferred his purchasing power to the government, has been abandoned. Indiffer? ence, neglect and extravagance in government finance are inexcusable. Public officials are trusted by those whom they serve to exercise dili? gence and care, to be aware of the consequences of their policies. With them ignorance can be no defense for failure to pursue sound financial policies; for there is a considerable body of knowledge available to aid and guide them?knowledge based on reality, fortified by common sense, and accumulated throughout the course of history. As much to be feared as ignorance and indifference is the deliberate intention of some individuals and groups to bring about great changes in the social structure by means of government spending beyond the ability of the taxpayers to support it. To such people debauchment of the currency and repudiation of the debt through endless inflationary deficit financing is a desirable goal. In this way the accumulated savings of nearly all classes can be destroyed and the productive processes by which the nation's wealth is formed can be broken down. It is an axiom of social revolution that its accomplishment can be hastened by destroying the value of the cur? rency and thereby the value of the government's obligations. Here, of course, the ethical problem of debt as a promise to pay is compounded with that of deception and subversion. Principles and Practicality At a time when the Federal debt is far greater than it has ever been, its ethical aspects can easily be overlooked or misunderstood. They in? volve not only the relationship between the government as borrower

Inflation and the Development of Underdeveloped Areas

Whether the relatively underdeveloped areas can accelerate their process of development by recourse to deliberate inflation has, in the recent past, been a subject of widespread contention. It now appears to be settled in the negative, at least by most professional economists and responsible central bankers. Nevertheless, it may still be useful to give some thought to the problem, particularly emphasizing aspects of the economic structure of underdeveloped countries that condition their response to a deliberate attempt to use inflation as a method of stimulating and accelerating economic development.' For the purposes of this paper inflation will be defined as any steady increase in the general level of prices (no matter whether at an increasing, decreasing, or constant rate), reflecting an expansion of money income relative to available goods and services, over a period of time. Once this rise has come to a halt, there is no further inflation.2 This steady increase in the price level is, if the monetary authorities are willing to make credit, available, basically the result of one group (private individuals or the government) in the economy attempting the consumption of a larger share of (given) real output than other groups are willing to acquiesce in.3 If the group is successful, the real income of some sector(s) of the economy must be reduced as the general price level rises through the process of competition for a given quantity of goods.4 If the amount of real output available to some groups (whose money income does not increase in proportion to the price level) is reduced, inflation may encourage economic development if the group gaining command over additional real resources purchases resources, such as machinery, which themselves will produce a stream of income in the future. The reason inflation is needed to secure these results is attributable to a situation where the existing level of voluntary savings is inadequate to sustain a desired rate of increase in real output; inflation, by redistributing income, may increase the amount of savings and therefore the possibility of increased real investment.5 The redistribution of income and wealth, the immediate decline in the standard of living of some segments of the community, a possible allocation of resources to luxury goods, inappropriate construction, investment in inventories or foreign exchange, and a possible deterioration in the country's external position are some of the costs of inflationary financing. If the additional savings go into undesirable investment, this will very likely prevent the inflation from having a significant effect on the rate of development.