Endogenous time-dependent rules and inflation inertia: preliminary version
When policy rules are changed, the effect of nominal rigidities should be modelled through endogenous pricing rules. We endogenize Taylor (1979) type pricing rule to examine the output effects of monetary disinflations. We derive optimal fixed-price time-dependent rules in inflationary steady states and during disinflations. We also develop a methodology to aggregate individual pricing rules which vary through disinflation. This allows us to reevaluate the output costs of monetary disinflation, including aspects as the role of the initial leveI of inflation and the importance of the degree of credibility of the policy change.
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- Ball, Laurence, 1994.
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- Almeida Neto, Heitor Vieira de & Bonomo, Marco Antônio Cesar, 1999.
"Optimal State-Dependent Rules, Credibility, and Inflation Inertia,"
Economics Working Papers (Ensaios Economicos da EPGE)
349, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Almeida, Heitor & Bonomo, Marco, 2002. "Optimal state-dependent rules, credibility, and inflation inertia," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1317-1336, October.
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