Tight money policies and inflation revisited

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Tight money policies and inflation revisited

Author Info

Joydeep Bhattacharya
Noritaka Kudoh

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Abstract

In this paper we reconsider the link between tight money policies and inflation in the spirit of Sargent and Wallace's (1981) influential paper, "Some unpleasant monetarist arithmetic." A standard neoclassical model with capital, bonds, and return-dominated currency is used. The potential for tight-money policies to be inflationary (unpleasant arithmetic) exists, even when the real interest rate is below the growth rate of the economy. Additionally, the likely observability of unpleasant arithmetic in real world economies is shown to depend crucially on the type of monetary policy rule that is used.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 35 (2002)
Issue (Month): 2 (May)
Pages: 185-217
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Handle: RePEc:cje:issued:v:35:y:2002:i:2:p:185-217

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Paper
- Bhattacharya, Joydeep & Kudoh, N, 2002. "Tight Money Policies and Inflation Revisited," Staff General Research Papers 5085, Iowa State University, Department of Economics.

Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Andreas Schabert, 2006. "Central Bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Tinbergen Institute Discussion Papers 06-025/2, Tinbergen Institute. [Downloadable!]
Other versions:
- Andreas Schabert, . "Central bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Working Papers 2003_5, Department of Economics, University of Glasgow, revised Jan 2003. [Downloadable!]
- Andreas Schabert, 2006. "Central Bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(4), pages 742-762, October. [Downloadable!] (restricted)
Marco Espinosa-Vega & Steven Russell, 2001. "Stability of steady states in a model of pleasant monetarist arithmetic," Working Paper 2001-20, Federal Reserve Bank of Atlanta. [Downloadable!]
Andreas Schabert, . "Identifying Monetary Policy Shocks with Changes in Open Market Operations," Working Papers 2003_10, Department of Economics, University of Glasgow, revised Jun 2003. [Downloadable!]
Other versions:
- Schabert, Andreas, 2005. "Identifying monetary policy shocks with changes in open market operations," European Economic Review, Elsevier, vol. 49(3), pages 561-577, April. [Downloadable!] (restricted)
Leopold von Thadden, 2004. "Active monetary policy, passive fiscal policy and the value of pure debt: some further monetarist arithmetic," Money Macro and Finance (MMF) Research Group Conference 2003 108, Money Macro and Finance Research Group. [Downloadable!]
Joydeep Bhattacharya & Joseph H. Haslag, 1999. "Monetary policy arithmetic: some recent contributions," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 26-36. [Downloadable!]
Other versions:
- Bhattacharya, Joydeep & Haslag, J., 2003. "Monetary Policy Arithmetic: Some Recent Contributions," Staff General Research Papers 10388, Iowa State University, Department of Economics.

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This page was last updated on 2009-11-25.

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