Models of Inflation and the Costs of Disinflation

Bankim Chadha, Paul Masson and Guy Meredith
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Bankim Chadha: International Monetary Fund
Guy Meredith: International Monetary Fund

IMF Staff Papers, 1992, vol. 39, issue 2, 395-431

Abstract: The focus of this analysis is on the output costs of disinflation. A model of inflation with both forward and backward elements seems to characterize reality. Such an inflation model is estimated using data for industrial countries, and the output costs of a disinflation path are calculated, first analytically in a simple theoretical model, then by a simulation of a global, multiregion empirical model. The credibility of a preannounced path for money consistent with the lowest output loss is considered. An alternative, more credible policy may be to announce an exchange rate peg to a low-inflation currency.

JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 1992
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Working Paper: Models of Inflation and the Costs of Disinflation (1991)
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