Return The Output Effect of Stopping Inflation when Velocity is Time Varying
This paper explores the effect of time varying velocity in a transition to price stability. Nonstationary velocity, expressed as function of consumption, is made endogenous in Ireland's (1997) model. We find that the disinflationary booms found by Ball (1994) may or may not disappear; and also that temporary output losses may be much larger than previously thought, depending on velocity. A gradual disinflation of low inflation may even be undesirable given its overall negative impact on the economy. Finally, we explore the optimal speed of disinflation.
|Date of creation:||01 Aug 2007|
|Contact details of provider:|| Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England|
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- Aubhik Khan & Robert G. King & Alexander L. Wolman, 2001.
"Optimal monetary policy,"
01-5, Federal Reserve Bank of Philadelphia.
- Aubhik Khan & Robert G. King & Alexander L. Wolman, 2002. "Optimal Monetary Policy," NBER Working Papers 9402, National Bureau of Economic Research, Inc.
- Aubhik Khan & Robert King & Alexander L. Wolman, 2002. "Optimal monetary policy," Working Papers 02-19, Federal Reserve Bank of Philadelphia.
- Aubhik Khan & Robert G. King & Alexander L. Wolman, 2000. "Optimal monetary policy," Working Paper 00-10, Federal Reserve Bank of Richmond.
- Ball, L. & Mankiw, N.G., 1992.
"Asymmetric Price Adjustment and Economic Fluctuations,"
Harvard Institute of Economic Research Working Papers
1602, Harvard - Institute of Economic Research.
- Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-261, March.
- Laurence Ball & N. Gregory Mankiw, 1992. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc.
- Anamaria Nicolae & Charles Nolan, 2004.
"The impact of imperfect credibility in a transition to price stability,"
Money Macro and Finance (MMF) Research Group Conference 2003
72, Money Macro and Finance Research Group.
- Nicolae, Anamaria & Nolan, Charles, 2006. "The Impact of Imperfect Credibility in a Transition to Price Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 47-66, February.
- Anamaria Nicolae & Charles Nolan, 2004. "The Impact of Imperfect Credibility in a Transition to Price Stability," CDMA Working Paper Series 200402, Centre for Dynamic Macroeconomic Analysis.
- Anamaria Nicolae & Charles Nolan, 2004. "The Impact Of Imperfect Credibility In A Transition To Price Stability," Royal Economic Society Annual Conference 2004 102, Royal Economic Society.
- Basu, Parantap & Dua, Pami, 1996. "The behavior of velocity and nominal interest rates in a cash-in-advance model," Journal of Macroeconomics, Elsevier, vol. 18(3), pages 463-478.
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