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Inflation and Its Variation: An Alternative Explanation

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  • Petra M. Geraats

    (University of California, Berkeley)

Abstract

This paper introduces a general objective function for monetary policy that abandons certainty equivalence and features 'prudence'. It provides an alternative explanation for the positive relation between the level and variability of inflation, both across countries and over time. In particular, the model predicts that high (low) inflation tends to be more variable (stable) over time.

Suggested Citation

  • Petra M. Geraats, 2000. "Inflation and Its Variation: An Alternative Explanation," Macroeconomics 0004001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0004001
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    Cited by:

    1. Tsyplakov, Alexander, 2010. "The links between inflation and inflation uncertainty at the longer horizon," MPRA Paper 26908, University Library of Munich, Germany.
    2. Petra M. Geraats, 2006. "Transparency of Monetary Policy: Theory and Practice," CESifo Economic Studies, CESifo Group, vol. 52(1), pages 111-152, March.
    3. Paolo Surico, 2008. "Measuring the Time Inconsistency of US Monetary Policy," Economica, London School of Economics and Political Science, vol. 75(297), pages 22-38, February.
    4. Surico, Paolo, 2003. "US Monetary Policy Rules: the Case for Asymmetric Preferences," Royal Economic Society Annual Conference 2003 199, Royal Economic Society.
    5. Orlando Gomes, 2015. "Sentiment Cyclicality," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 9(2), pages 104-134, December.
    6. Paolo Surico, 2002. "Inflation Targeting and Nonlinear Policy Rules: the Case of Asymmetric Preferences," Macroeconomics 0210002, University Library of Munich, Germany, revised 23 Feb 2004.
    7. Gustavo Nicolás Páez, 2015. "Prediciendo decisiones de agentes económicos: ¿Cómo determina el Banco de la República de Colombia la tasa de interés?," Documentos CEDE 12567, Universidad de los Andes, Facultad de Economía, CEDE.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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