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Credible Disinflation with Staggered Price Setting

  • Laurence Ball

This paper determines the real effects of credible disinflation when price setting is staggered. The results are surprising: a fairly quick disinflation causes a boom. This finding suggests that nominal price rigidity alone does not explain why disinflation is costly in actual economies.

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File URL: http://www.nber.org/papers/w3555.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3555.

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Date of creation: Dec 1990
Date of revision:
Publication status: published as American Economic Review, March 1994
Handle: RePEc:nbr:nberwo:3555
Note: EFG
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184 National Bureau of Economic Research, Inc.
  2. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-60, December.
  3. Edmund Phelps, 1978. "Disinflation without recession: Adaptive guideposts and monetary policy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(4), pages 783-809, December.
  4. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  5. Ball, Laurence, 1994. "Credible Disinflation with Staggered Price-Setting," American Economic Review, American Economic Association, vol. 84(1), pages 282-89, March.
  6. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  7. Thomas J. Sargent, 1981. "Stopping moderate inflations: the methods of Poincaré and Thatcher," Working Papers 1, Federal Reserve Bank of Minneapolis.
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