Inflation is Always and Everywhere an Interest-Rate Phenomenon

Gilles Bélanger

MPRA Paper from University Library of Munich, Germany

Abstract: Following an earlier paper, I investigate an economy where nominal interest rates are rigid, but aggregate prices are not. Though the title exaggerates, interest rates rigidity does account for an uncanny number of stylized facts about inflation. This paper shows that previously shown results are robust to changes in the specification of interest rate rigidity. Results investigated include: (1) the procyclicality of inflation, (2) inflation control through interest rate manipulation,(3) the persistence of inflation since World War II, (4) the Great Moderation under inflation targeting, (5) real rate volatility under a gold standard, (6) the price puzzle.

Keywords: Interest Rate Rigidity; Inflation; Monetary Policy; Fisher Effect. (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 (search for similar items in EconPapers)
Date: 2016-04-19
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:70841

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