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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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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
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  1. Laurence Ball, 1990. "Credible Disinflation with Staggered Price Setting," NBER Working Papers 3555, National Bureau of Economic Research, Inc.
  2. Thomas J. Sargent, 1981. "Stopping moderate inflations: the methods of Poincaré and Thatcher," Working Papers 1, Federal Reserve Bank of Minneapolis.
  3. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  4. N. Gregory Mankiw, 1990. "A Quick Refresher Course in Macroeconomics," NBER Working Papers 3256, National Bureau of Economic Research, Inc.
  5. Christina D. Romer and David H. Romer., 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," Economics Working Papers 89-107, University of California at Berkeley.
  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. 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.
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