Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099222 | Journal of Economic Dynamics and Control | 2010 | 23 Pages |
Abstract
In this paper, we take an analytical approach to examine possible adverse effects of the use of inflation targeting as a disinflation regime. The idea is that a strict interpretation of an inflation target may preserve inflationary distortions after price stability is attained. We show that such a policy not only creates a slump in output but may increase macroeconomic volatility substantially in a model in which wages are subject to a Taylor staggering structure. The policy implication is that the problems associated with an excessively rigid inflation targeting policy are even more severe during a disinflationary episode.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Christian Saborowski,