The Costs and Benefits of Going from Low Inflation to Price Stability
Harvard University; National Bureau of Economic Research
Two-period overlapping generations model with capital income taxation, housing sector, money demand (MIU), and government budget constraint integrating monetary and fiscal policy. Analyzes welfare costs of inflation through tax-inflation intera
Cobb-Douglas production function with constant returns to scale; competitive factor markets
Table 3.1 p.128
Price stability target (measured inflation 2%, true inflation 0%); benchmark case with saving elasticity 0.4 and deadweight loss parameter 0.4
Authors describe this as the benchmark case with most plausible parameter values (ηsr=0.4, λ=0.4)