What has become of the \\"stability-through-inflation\\" argument?

James Bullard and Alvin L. Marty

Review, 1998, issue Jan, 37-45

Abstract: In this article, James B. Bullard and Alvin L. Marty begin by summarizing some popular arguments for positive steady-state rates of inflation based on the idea that a certain amount of inflation stabilizes economic performance. Then, synthesizing a number of disparate results in a single framework and using a general class of money-demand functions, they find that the stability-through-inflation arguments have either been completely replaced (by potent but unsettling results based on rational expectations) or called into question (by more sophisticated treatments of the adaptive expectations hypothesis).

Keywords: Inflation; (Finance) (search for similar items in EconPapers)
Date: 1998
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