Imperfectly-Credible Disinflation of Small Inflations
In this paper we study and quantify the eÂ¤ects of a disinflationary policy on output and welfare. Our focus is the policy question of the optimal response to low inflation.The analysis takes place in the context of a DSGE model with sticky prices, time varying velocity and imperfect credibility. The nonlinear solution method reveals that early output losses may be more pronounced and more prolonged than previously suggested in the literature, and there may be insufficient compensation from a subsequent higher steady state to justify taking any disinflationary policy action in some cases.
|Date of creation:||01 Jan 2010|
|Contact details of provider:|| Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England|
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- Marco Bonomo & Carlos Viana de Carvalho, 2005. "Imperfectly Credible Disinflation under Endogenous Time-Dependent Pricing," Macroeconomics 0509005, EconWPA, revised 09 Sep 2005.
- Carvalho, Carlos Viana de & Bonomo, Marco Antônio Cesar, 2005. "Imperfectly credible disinflation under endogenous time-ependent pricing," Economics Working Papers (Ensaios Economicos da EPGE) 600, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Anamaria Nicolae & Charles Nolan, 2004.
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- 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.
- Lynne Evans & Anamaria Nicolae, 2010. "The Output Effect of a Transition to Price Stability When Velocity Is Time Varying," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 859-878, 08.
- Serletis, Apostolos & Yavari, Kazem, 2004. "The welfare cost of inflation in Canada and the United States," Economics Letters, Elsevier, vol. 84(2), pages 199-204, August.
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