Models of Inflation and the Costs of Disinflation
Summary:
This paper focuses on the output costs of disinflation. A model of inflation with both forward and backward elements seems to characterize reality. Such an inflation model is estimated using data for industrial countries, and the output costs of a disinflation path are calculated, first analytically in a simple theoretical model, then by simulation of a global, multi-region empirical model. The credibility of a preannounced path for money consistent with the lowest output loss is considered. An alternative, more credible policy may be to announce an exchange rate peg to a low inflation currency.
Series:
Working Paper No. 1991/097
Subject:
Capacity utilization Demand for money Disinflation Inflation Monetary base Money Prices Production
Notes:
Also published in Staff Papers, Vol. 39, No. 2, June 1992.
English
Publication Date:
October 1, 1991
ISBN/ISSN:
9781451949483/1018-5941
Stock No:
WPIEA0971991
Pages:
34
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