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Relative Prices and Inflation Stabilisation

Author

Listed:
  • Kosuke Aoki

    (Faculty of Economics, University of Tokyo)

Abstract

When price adjustment is sluggish, inflation is costly in terms of welfare because it distorts various kinds of relative prices. Stabilising aggregate price inflation does not necessarily minimise these costs, but stabilising a well-designed core inflation minimises the cost of relative price fluctuations and thus the cost of inflation.

Suggested Citation

  • Kosuke Aoki, 2015. "Relative Prices and Inflation Stabilisation," UTokyo Price Project Working Paper Series 047, University of Tokyo, Graduate School of Economics.
  • Handle: RePEc:upd:utppwp:047
    as

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    File URL: http://www.price.e.u-tokyo.ac.jp/img/researchdata/pdf/p_wp065.pdf
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    References listed on IDEAS

    as
    1. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing and the General Equilibrium Dynamics of Money and Output," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 655-690.
    2. Mark Gertler & John Leahy, 2008. "A Phillips Curve with an Ss Foundation," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 533-572, June.
    3. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Relative prices; inflation.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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