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Defending zero inflation: all for naught

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  • W. Lee Hoskins
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    Abstract

    Economists and policymakers disagree on the lengths central banks should go in pursuit of price stability and, in fact, on exactly what price stability means. This essay advocates that central banks try to maintain stable price levels in their countries, and it argues that the benefits of achieving this objective are worth the transition costs. The essay reviews some of the relevant academic literature on the economic effects of inflation and specifically addresses the issues of transition cost, fiscal dominance, and credibility.

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    Bibliographic Info

    Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

    Volume (Year): (1991)
    Issue (Month): Spr ()
    Pages: 16-20

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    Handle: RePEc:fip:fedmqr:y:1991:i:spr:p:16-20:n:v.15no.2

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    Related research

    Keywords: Inflation (Finance);

    References

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    1. Chari, V V & Christiano, Lawrence J & Kehoe, Patrick J, 1991. "Optimal Fiscal and Monetary Policy: Some Recent Results," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 519-39, August.
    2. Thomas F. Cooley & Gary D. Hansen, 1991. "The welfare costs of moderate inflations," Proceedings, Federal Reserve Bank of Cleveland, pages 483-518.
    3. S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
    4. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-31, August.
    5. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    6. David E. Lebow & John M. Roberts & David J. Stockton, 1992. "Economic performance under price stability," Working Paper Series / Economic Activity Section 125, Board of Governors of the Federal Reserve System (U.S.).
    7. Laurence Ball & Stephen G. Cecchetti, 1990. "Inflation and Uncertainty at Long and Short Horizons," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 215-254.
    8. David Altig & Charles T. Carlstrom, 1991. "Bracket creep in the age of indexing: have we solved the problem?," Working Paper 9108, Federal Reserve Bank of Cleveland.
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    Cited by:
    1. Dimitri B. Papadimitriou & L. Randall Wray, 1994. "Flying Blind: The Federal Reserve's Experiment with Unobservables," Economics Working Paper Archive wp_124, Levy Economics Institute.
    2. Ireland, Peter N., 1995. "Optimal disinflationary paths," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1429-1448, November.
    3. Samantha Johnson, 1993. "The costs of inflation revisited," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, March.
    4. Michael T. Belongia, 1992. "Selecting an intermediate target variable for monetary policy when the goal is price stability," Working Papers 1992-008, Federal Reserve Bank of St. Louis.
    5. Willem Thorbeck, 1997. "Disinflationary Monetary Policy and the Distribution of Income," Macroeconomics 9711008, EconWPA.

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