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Opportunistic and Deliberate Disinflation under Imperfect Credibility

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  • Bomfim, Antulio N
  • Rudebusch, Glenn D

Abstract

One strategy for disinflation prescribes a deliberate path towards low inflation. A contrasting opportunistic approach eschews deliberate action and instead waits for unforeseen shocks to reduce inflation. This paper compares the ability of these two approaches to achieve disinflation--and at what cost. We analyze these issues using the Federal Reserves FRB/US model, which allows alternative assumptions to be made about expectations held by agents in the economy; hence, the credibility of the central bank can be considered in assessing the cost of deliberate and opportunistic disinflations.

Suggested Citation

  • Bomfim, Antulio N & Rudebusch, Glenn D, 2000. "Opportunistic and Deliberate Disinflation under Imperfect Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 707-721, November.
  • Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:4:p:707-21
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