On the 'Conquest' of Inflation
Sargent (1999) warns that if policy makers’ views on the unemployment-inflation trade-off are driven by empirical correlations, rather than theory, disinflations (escapes from high to low inflation) may periodically occur but are not bound to last. This Paper asks how different inflation objectives by the policy maker affect this result. We show that escapes in the neighborhood of zero inflation are less frequent and have a shorter duration, as policy objectives become more inflation averse. A sufficiently (but not infinitely) inflation averse policy maker never escapes Nash inflation and, on average, yields a lower inflation rate.
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- Richard Clarida & Jordi Gali & Mark Gertler, 1998.
"Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory,"
NBER Working Papers
6442, National Bureau of Economic Research, Inc.
- Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
- Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
- Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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