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Time-Consistent Policy and Persistent Changes in Inflation

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  • Laurence M. Ball

Abstract

This paper presents a model of dynamically consistent monetary policy that explains changes in inflation over time. In the model -- as in the postwar United States -- adverse supply shocks trigger persistent increases in inflation, and disinflation occurs when a tough policymaker creates a recession. The paper also proposes an approach to selecting a unique, plausible equilibrium in infinite-horizon models of monetary policy.

Suggested Citation

  • Laurence M. Ball, 1990. "Time-Consistent Policy and Persistent Changes in Inflation," NBER Working Papers 3529, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3529
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