The Optimal Perception of Inflation Persistence is Zero

Kai Leitemo

Scandinavian Journal of Economics, 2007, vol. 109, issue 1, 107-113

Abstract: This study shows that, in an economy with inflation persistence, it is always welfare improving for a central bank that operates under discretion to behave as if there were no inflation persistence. Under reasonable assumptions about inflation persistence, all of the inefficiency associated with discretionary policymaking is then removed.

Date: 2007
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