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What Determines the Short-run Output-Inflation Trade-off?


  • Anthony Yates
  • Bryan Chapple


Using post-war data on 43 countries, this paper shows that the finding that the trade-off between inflation and output falls as inflation rises is quite robust. The implication is that the real effects of monetary policy might be greater as the economy moves towards price stability. The paper also looks at whether economies should approach price stability quickly or slowly, and finds, in common with other research, that fast disinflations tend to cost less in terms of lost output.

Suggested Citation

  • Anthony Yates & Bryan Chapple, 1996. "What Determines the Short-run Output-Inflation Trade-off?," Bank of England working papers 53, Bank of England.
  • Handle: RePEc:boe:boeewp:53

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    References listed on IDEAS

    1. Nicola Anderson & Francis Breedon, 1996. "UK Asset Price Volatility Over the Last 50 Years," Bank of England working papers 51, Bank of England.
    2. Andy Haldane & Bennett McCallum & Chris Salmon, 1996. "Base Money Rules in the UK," Bank of England working papers 45, Bank of England.
    3. Paul Fisher & Juna Vega, 1993. "An Empirical Analysis of M4 in the United Kingdom," Bank of England working papers 21, Bank of England.
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    Cited by:

    1. W. Wascher & Palle S. Andersen, 1999. "Sacrifice ratios and the conduct of monetary policy in conditions of low inflation," BIS Working Papers 82, Bank for International Settlements.
    2. Hasan Bakhshi & Pablo Burriel-Llombart & Hashmat Khan & Barbara Rudolf, 2003. "Endogenous price stickiness, trend inflation, and the New Keynesian Phillips curve," Bank of England working papers 191, Bank of England.
    3. Juncal Cunado Eizaguirre & Fernando PÈrez de GracÌa Hidalgo, "undated". "Tasa de sacrificio en la UEM: Un an·lisis empÌrico," Studies on the Spanish Economy 70, FEDEA.
    4. Simon Hall & Anthony Yates, 1998. "Are there downward nominal rigidities in product markets?," Bank of England working papers 80, Bank of England.
    5. Christopher Bowdler, 2003. "Openness and the Output-Inflation Tradeoff," Economics Papers 2003-W04, Economics Group, Nuffield College, University of Oxford.
    6. Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
    7. Viñals, José, 2001. "Monetary Policy Issues in a Low Inflation Environment," CEPR Discussion Papers 2945, C.E.P.R. Discussion Papers.
    8. Bakhshi, Hasan & Khan, Hashmat & Burriel-Llombart, Pablo & Rudolf, Barbara, 2007. "The New Keynesian Phillips curve under trend inflation and strategic complementarity," Journal of Macroeconomics, Elsevier, vol. 29(1), pages 37-59, March.
    9. Nishizaki, Kenji & Watanabe, Tsutomu, 2000. "Output-Inflation Trade-Off at Near-Zero Inflation Rates," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 304-326, December.

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