Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5058083 | Economics Letters | 2016 | 4 Pages |
Abstract
â¢We explain the positive relationship between inflation level and inflation volatility.â¢The main argument follows the Laffer curve logic applied to seigniorage.â¢The result is robust to multiple and unique equilibria.â¢The result holds locally and globally.
We use a standard dynamic general equilibrium model with flexible prices, money in the utility function, exogenous fiscal policy and accommodating monetary policy to analytically demonstrate the positive relationship between the steady state level of inflation and business cycle inflation volatility. This result holds in the presence of unique as well as multiple equilibria.
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Authors
Mikhail Dmitriev, Erasmus K. Kersting,