کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
5066957 | 1476807 | 2013 | 24 صفحه PDF | دانلود رایگان |
- Compare disinflation realised through either a money supply or an interest rate rule.
- Monetary policy strategy matters for the dynamics after a disinflation.
- The theoretical sacrifice ratios are in line with empirical estimates.
- Disinflations under an interest rate rule exhibit lower sacrifice ratios.
- The overall welfare gain is not affected by how the disinflation is implemented.
Empirical studies show that successful disinflations entail a period of output contraction. Using a medium-scale New Keynesian model, we compare the effects of disinflations of different speed and timing, implemented through either a money supply rule or an interest rate rule. In terms of transitional output loss, cold-turkey disinflations under an interest rate rule are less costly than those under a money supply rule and are accomplished more rapidly. Furthermore, gradual or anticipated disinflations deliver lower sacrifice ratios. From a welfare perspective, despite the temporary economic contraction, the transitional welfare loss is quantitatively negligible, so that disinflations are overall welfare-improving. The overall welfare gain is not affected by how the disinflation is actually implemented: what really matters is the achievement of a permanently lower inflation rate.
Journal: European Economic Review - Volume 61, July 2013, Pages 77-100