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Disequilibrium Inflation

Author

Listed:
  • Furukawa, Yoko

Abstract

I construct a model that examines the behavior of the inflation rate considering multiple functions of money. The model demonstrates that Taylor Rules are effective when the inflation rate moves to the same direction with regard to money as a medium of exchange and a storage of value. Under deflation, these two functions of money diverge oppositely and that leads to a liquidity trap which the economy struggles to escape.

Suggested Citation

  • Furukawa, Yoko, 2026. "Disequilibrium Inflation," MPRA Paper 127878, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127878
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    References listed on IDEAS

    as
    1. Jess Benhabib & Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Avoiding Liquidity Traps," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 535-563, June.
    2. Benhabib, Jess & Schmitt-Grohe, Stephanie & Uribe, Martin, 2001. "The Perils of Taylor Rules," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 40-69, January.
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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