This survey attempts to cover an extremely broad topic by organizing . around three sets of issues: ongoing (steady state) inflation; cyclical interaction of inflation with real variables; and positive analysis of monetary policy behavior. With regard to ongoing inflation, the paper demonstrates that the principal conclusions of theoretical analysis are not highly sensitive to details of model specification, provided that the latter posits rational agents free of money illusion. Whether one assumes finite-lived or infinite-lived agents, such models suggest that steady-state inflation rates will conform fairly closely to money stock growth rates, that superneutrality is not strictly implied but departures should be minor, and that socially optimal inflation rates correspond to the Chicago Rule. The first two of these conclusions are consistent with available evidence. With regard to the cyclical interaction of inflation with aggregate output and employment, there is much less professional agreement: four classes of aggregate-supply (or Phillips curve) theories -are currently in .use by researchers and at least two have been able thus far to withstand attempts at refutation. With regard to policy, a leading question is why the authorities have behaved, over the postwar era, in a manner that has resulted in a many-fold increase in the price level in most industrialized nations. A full answer will require a better theory of the political process than is now available, but an important insight regarding inflationary bias is suggested by models that focus on the effects of "discretionary" period-by-period decision making by a monetary authority that seeks to avoid unemployment as well as inflation.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
2312.
Length: Date of creation: Aug 1991 Date of revision: Handle: RePEc:nbr:nberwo:2312
Note: ME Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
Chapter
McCallum, Bennett T., 1990.
"Inflation: Theory and evidence,"
Handbook of Monetary Economics,
in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 18, pages 963-1012
Elsevier.
[Downloadable!] (restricted)
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Laidler, David E W & Parkin, J Michael, 1975.
"Inflation: A Survey,"
Economic Journal,
Royal Economic Society, vol. 85(340), pages 741-809, December.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)