TIME-CONSISTENT POLICY AND PERSISTENT CHANGES IN INFLATION

Authors
Citation
L. Ball, TIME-CONSISTENT POLICY AND PERSISTENT CHANGES IN INFLATION, Journal of monetary economics, 36(2), 1995, pp. 329-350
Citations number
22
Categorie Soggetti
Business Finance",Economics
ISSN journal
03043932
Volume
36
Issue
2
Year of publication
1995
Pages
329 - 350
Database
ISI
SICI code
0304-3932(1995)36:2<329:TPAPCI>2.0.ZU;2-6
Abstract
This paper presents a model of dynamically consistent monetary policy that explains changes in inflation over time. In the model - as in the postwar United States - adverse supply shocks trigger increases in in flation. High inflation persists until a tough policy-maker causes a r ecession to disinflate. The paper also proposes an approach to selecti ng a unique equilibrium in infinite-horizon models of monetary policy.