We define the Fisherian Golden Rule measure of bond market inflation expectations as the difference between bond rates and trend real GDP growth rates. The concept is based on the Fisherian theory that an increase in longer-term inflation expectations would be reflected in longer-term interest...

Inflation magnifies the distorting effect of taxes on the allocation of resources through the credit market. Distortions arise because of the difference between the after-tax real return to lenders and the real cost to borrowers. These distortions could be avoided by indexing to inflation the...