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Optimal disinflationary paths Author info | Abstract | Publisher info | Download info | Related research | Statistics Peter N. Ireland
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This paper characterizes optimal monetary policy in the context of a general equilibrium model with optimizing agents and staggered price setting. Starting from a steady state with positive inflation, a rapid disinflation is desirable when announcements of future monetary policy are fully credible. Disinflationary policy yields substantial losses in output and employment when the monetary authority lacks credibility; nevertheless, the benefits of disinflation still exceed the costs. Disinflation often fails to be welfare-improving, however, when lost seignorage revenues must be replaced using other distortionary taxes.
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Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number
95-01.
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Date of creation: 1995Date of revision:
Handle: RePEc:fip:fedrwp:95-01Contact details of provider: Web page: http://www.richmondfed.org/ More information through EDIRC
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Keywords: Inflation (Finance) ; Monetary policy ; Other versions of this item:
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Full
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