“The popular conviction is that inflation is harmful, but in general its effects are not well understood. This is because the effects of inflation are very varied and even subtle. The phrase appears in a 2012 study by the Bank of Portugal on the change in social welfare caused by an increase in inflation when using distorting taxes, such as income or consumption taxes. And it shows how the analysis of the impacts of inflation is more complex than one might think.
The study is based on a scenario in which inflation is “fully anticipated”, contrary, therefore, to what is currently happening. But before moving on to the conclusions, he theorizes about the benefits and disadvantages of increases in inflation, such as the distributive effects (which can be regressive, benefiting the richest) or the impacts on the tax system.
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Source: Observadora
