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What has become of the \\"stability-through-inflation\\" argument?

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In this article, James B. Bullard and Alvin L. Marty begin by summarizing some popular arguments for positive steady-state rates of inflation based on the idea that a certain amount of inflation stabilizes economic performance. Then, synthesizing a number of disparate results in a single framework and using a general class of money-demand functions, they find that the stability-through-inflation arguments have either been completely replaced (by potent but unsettling results based on rational expectations) or called into question (by more sophisticated treatments of the adaptive expectations hypothesis).

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  • James B. Bullard & Alvin L. Marty, 1998. "What has become of the \\"stability-through-inflation\\" argument?," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 37-45.
    • Handle: RePEc:fip:fedlrv:y:1998:i:jan:p:37-45
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    References listed on IDEAS

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    3. Robert M. Adams, 1994. "On the welfare cost of inflation," Working Papers in Applied Economic Theory 94-07, Federal Reserve Bank of San Francisco.
    4. Bullard James, 1994. "Learning Equilibria," Journal of Economic Theory, Elsevier, vol. 64(2), pages 468-485, December.
    5. Evans, Jean Lynne & Yarrow, George Keith, 1981. "Some Implications of Alternative Expectations Hypotheses in the Monetary Analysis of Hyperinflations," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 61-80, March.
    6. Bruno, Michael, 1989. "Econometrics and the Design of Economic Reform," Econometrica, Econometric Society, vol. 57(2), pages 275-306, March.
    7. Assaf Razin & Efraim Sadka (ed.), 1987. "Economic Policy in Theory and Practice," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-18584-9.
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    Inflation (Finance);

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