Optimal disinflationary paths
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.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
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.:
- Cooley, Thomas F & Hansen, Gary D, 1991.
"The Welfare Costs of Moderate Inflations,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 23(3), pages 483-503, August.
- Cooley, T.F. & Hansen, G.D., 1988.
"The Inflation Tax In A Real Business Cycle Model,"
RCER Working Papers
155, University of Rochester - Center for Economic Research (RCER).
- Robert G. King, 1991. "Money and business cycles," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
- Edmund Phelps, 1978. "Disinflation without recession: Adaptive guideposts and monetary policy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(4), pages 783-809, December.
- Stanley Fischer, 1986. "Contracts, Credibility, and Disinflation," NBER Working Papers 1339, National Bureau of Economic Research, Inc.
- Cooley, T.F. & Cho, J.O., 1991.
"The Business Cycle with Nominal Contracts,"
90-07, Rochester, Business - General.
- Olivier J. Blanchard, 1982. "Price Asynchronization and Price Level Inertia," NBER Working Papers 0900, National Bureau of Economic Research, Inc.
- W. Lee Hoskins, 1991. "Defending zero inflation: all for naught," Economic Commentary, Federal Reserve Bank of Cleveland, issue Apr.
- S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
- Robert P. Black, 1990. "In support of price stability," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 3-6.
- Taylor, John B, 1983.
"Union Wage Settlements during a Disinflation,"
American Economic Review,
American Economic Association, vol. 73(5), pages 981-93, December.
- Lee E. Ohanian & Alan C. Stockman, 1994. "Short-run effects on money when some prices are sticky," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-24.
- Ball, Laurence, 1994.
"Credible Disinflation with Staggered Price-Setting,"
American Economic Review,
American Economic Association, vol. 84(1), pages 282-89, March.
- Laurence Ball, 1990. "Credible Disinflation with Staggered Price Setting," NBER Working Papers 3555, National Bureau of Economic Research, Inc.
- anonymous, 1987. "Comment on proposed actions," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 296-297.
- Greenwood, Jeremy & Huffman, Gregory W., 1987. "A dynamic equilibrium model of inflation and unemployment," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 203-228, March.
- Lucas, Deborah, 1999. "Price and interest rate dynamics induced by multiperiod contracts," The North American Journal of Economics and Finance, Elsevier, vol. 10(2), pages 315-338.
- W. Lee Hoskins, 1991. "Defending zero inflation: all for naught," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 16-20.
- Danziger, Leif, 1988. "Costs of Price Adjustment and the Welfare Economics of Inflation and Disinflation," American Economic Review, American Economic Association, vol. 78(4), pages 633-46, September.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:19:y:1995:i:8:p:1429-1448. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.