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Relative Prices and Inflation Stabilization

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  • Kosuke Aoki

Abstract

type="main"> When price adjustment is sluggish, inflation is costly in terms of welfare because it distorts various kinds of relative prices. Stabilizing aggregate price inflation does not necessarily minimize these costs, but stabilizing a well-designed core inflation minimizes the cost of relative price fluctuations and, thus, the cost of inflation.

Suggested Citation

  • Kosuke Aoki, 2015. "Relative Prices and Inflation Stabilization," The Japanese Economic Review, Japanese Economic Association, vol. 66(1), pages 35-59, March.
    • Handle: RePEc:bla:jecrev:v:66:y:2015:i:1:p:35-59
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    File URL: http://hdl.handle.net/10.1111/jere.12060
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    References listed on IDEAS

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