Why Does High Inflation Raise Inflation Uncertainty?
This paper presents a model of monetary policy in which a rise in inflation raises uncertainty about future inflation. When inflation is low, there is a consensus that the monetary authority will try to keep it low. When inflation is high, policymakers face a dilemma: they would like to disinflate, but fear the recession that would result. The public does not know the tastes of future policymakers, and thus does not know whether disinflation will occur.
|Date of creation:||Jan 1990|
|Date of revision:|
|Publication status:||published as Journal of Monetary Economics, June 1992,pp. 371-388|
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