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Hyperinflation, disinflation, deflation, etc.: A unified and micro-founded explanation for inflation

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  • Harashima, Taiji

Abstract

In this paper, I present a unified and micro-founded explanation for various types of inflation without assuming ad hoc frictions or irrationality. The explanation is similar to the conventional inflation theory in the sense that an independent central bank can control inflation and also similar to the fiscal theory of the price level in the sense that a source of inflation lies in the behavior of government. Inflation accelerates or decelerates through the simultaneous optimization of a government and the representative household if their time preference rates are heterogeneous. This inflation acceleration mechanism will be prevented from working if a central bank is truly independent.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3836.

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Date of creation: 05 Jul 2007
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Handle: RePEc:pra:mprapa:3836

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Keywords: Hyperinflation; chronic inflation; disinflation; deflation; central bank independence; the fiscal theory of the price level;

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References

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Cited by:
  1. Harashima, Taiji, 2013. "The Phillips Curve and a Micro-foundation of Trend Inflation," MPRA Paper 51305, University Library of Munich, Germany.
  2. Harashima, Taiji, 2009. "Depression as a Nash Equilibrium Consisting of Strategies of Choosing a Pareto Inefficient Transition Path," MPRA Paper 18953, University Library of Munich, Germany.
  3. Harashima, Taiji, 2008. "A Microfounded Mechanism of Observed Substantial Inflation Persistence," MPRA Paper 10668, University Library of Munich, Germany.

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