THE OPTIMAL INFLATION TARGET IN AN ECONOMY WITH LIMITED ENFORCEMENT

Gaetano Antinolfi (), Costas Azariadis and James Bullard

Macroeconomic Dynamics, 2016, vol. 20, issue 2, 582-600

Abstract: We formulate a central bank's problem of selecting an optimal long-run inflation rate as the choice of a distorting tax by a planner who wishes to maximize discounted stationary utility for a heterogeneous population of infinitely lived households in an economy with constant aggregate income and public information. Households are segmented into agents who store value in currency alone and agents who have access to both currency and loans. We show that the optimum inflation rate is positive, because inflation reduces the value of the outside option for credit agents and raises their debt limits.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: The optimal inflation target in an economy with limited enforcement (2012)
Working Paper: The optimal inflation target in an economy with limited enforcement (2008)
Working Paper: The optimal inflation target in an economy with limited enforcement (2008)
Working Paper: The Optimal Inflation Target in an Economy with Limited Enforcement (2008)
Working Paper: The optimal inflation target in an economy with limited enforcement (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:20:y:2016:i:02:p:582-600_00

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().