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Defending zero inflation: all for naught

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  • W. Lee Hoskins

Abstract

Economists and policymakers disagree on the lengths central banks should go in pursuit of price stability and, in fact, on exactly what price stability means. This essay advocates that central banks try to maintain stable price levels in their countries, and it argues that the benefits of achieving this objective are worth the transition costs. The essay reviews some of the relevant academic literature on the economic effects of inflation and specifically addresses the issues of transition cost, fiscal dominance, and credibility.

Suggested Citation

  • W. Lee Hoskins, 1991. "Defending zero inflation: all for naught," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 16-20.
  • Handle: RePEc:fip:fedmqr:y:1991:i:spr:p:16-20:n:v.15no.2
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    References listed on IDEAS

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    1. Thomas F. Cooley & Gary D. Hansen, 1991. "The welfare costs of moderate inflations," Proceedings, Federal Reserve Bank of Cleveland, pages 483-518.
    2. Chari, V V & Christiano, Lawrence J & Kehoe, Patrick J, 1991. "Optimal Fiscal and Monetary Policy: Some Recent Results," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 519-539, August.
    3. S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
    4. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    5. David E. Altig & Charles T. Carlstrom, 1991. "Bracket creep in the age of indexing: have we solved the problem?," Working Paper 9108, Federal Reserve Bank of Cleveland.
    6. Laurence Ball & Stephen G. Cecchetti, 1990. "Inflation and Uncertainty at Long and Short Horizons," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 215-254.
    7. David E. Lebow & John M. Roberts & David J. Stockton, 1992. "Economic performance under price stability," Working Paper Series / Economic Activity Section 125, Board of Governors of the Federal Reserve System (U.S.).
    8. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-631, August.
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    Citations

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    Cited by:

    1. Dimitri B. Papadimitriou & L. Randall Wray, 1994. "Flying Blind: The Federal Reserve's Experiment with Unobservables," Economics Working Paper Archive wp_124, Levy Economics Institute.
    2. Samantha Johnson, 1993. "The costs of inflation revisited," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 56, March.
    3. Ireland, Peter N., 1995. "Optimal disinflationary paths," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1429-1448, November.
    4. Michael T. Belongia, 1992. "Selecting an intermediate target variable for monetary policy when the goal is price stability," Working Papers 1992-008, Federal Reserve Bank of St. Louis.
    5. Willem Thorbeck, 1997. "Disinflationary Monetary Policy and the Distribution of Income," Macroeconomics 9711008, EconWPA.

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    Keywords

    Inflation (Finance);

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