Why Does Inflation Differ across Countries?
In: Reducing Inflation: Motivation and Strategy
AbstractThis paper attempts to explain the differences in inflation performance across countries. Earlier research has examined this topic, but it has considered only some of the factors that might be empirically important determinants of inflation rates. We consider the distaste for inflation, optimal tax considerations, time consistency issues, distortionary non-inflation policies and other factors that might be empirically important determinants of inflation performance. Overall, the results suggest that institutional arrangements - central bank independence or exchange rate mechanisms - are relatively unimportant determinants of inflation performance, while economic fundamentals - openness and optimal tax considerations - are relatively important determinants.
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Other versions of this item:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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