Disinflation with imperfect credibility
AbstractThis paper presents a theory of the real effects of disinflation. As in New Keynesian models, price adjustment is staggered across firms, As in New Classical models, credibility is imperfect: the monetary authority may not complete a promised disinflation. The combination of imperfect credibility and staggering yields more plausible results than either of these assumptions alone. In particular, an announced disinflation reduces expected output if credibility is sufficiently low.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 35 (1995)
Issue (Month): 1 (February)
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Web page: http://www.elsevier.com/locate/inca/505566
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