Can Tighter Money Now Mean Higher Inflation Now?
AbstractSargent and Wallace (1981) have shown by an example, termed "spectacular", that a lowering of the growth rate of money may in some cases increase the rate of inflation - not only in the end, but even from the start. I show that this "spectacular" result ceases to hold if the central bank is restricted always to choose the lowest final inflation rate. On the other hand, the spectacular result may appear again if the parameters of their example are changed in a suitable way.
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Bibliographic InfoPaper provided by Uppsala - Working Paper Series in its series Papers with number 1996-03.
Length: 23 pages
Date of creation: 1996
Date of revision:
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Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.
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Fax: + 46 18 471 14 78
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MONEY; MONETARY POLICY; INFLATION; PRICES;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
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