Monetary Policy and its Effects on Inflation

Badrul Haque

Revue Économique, 1985, vol. 36, issue 6, 1271-1300

Abstract: [eng] Monetary policy and its effects on inflation. M. Badrul Haque. Sargent and Wallace [1981] use a hyperinflation model to challenge the ability of the Central Bank to exert a desired influence on the path of inflation either in the transition period or in the steady state when the gocernment budget constraint is explicit. The game is to show that even in a Monetarist model it is the stance of fiscal policy which ultimately matters in the fight against inflation. Nevertheless, the formulation is vulnerable to two distinct criticisms. First, asset demands are poorly motivated. Second, the hyperinflation model ignores the effect of movements in real output and their effect on money demand. The formulation we present has the virtue that such changes could be simultaneously analysed, in addition to providing Sidrauski-type microfoundations. An additional source of richness in our formulation is that agents have to form expectations on the prospect of capital gains on outstanding bond holdings. The specification of fixed nominal or indexed coupon values on bonds is an important dimension to the problems in which we are interested. In this papers, we illustrate the circumstances under which the Central Bank can exert a desired influence on inflation path using monetary policy on its own, and provide expositions of the original Sargent and Wallace results. [fre] Sargent et Wallace (1981) ont construit un module d'hyperinflation qui démontre l'incapacité de la Banque Centrale à maîtriser 1 inflation lorsque 1 on pose explicite­ment la contrainte budgétaire clé l'Etat.. L'objectif de cet exercice était de montrer que même dans un modèle monétariste c'est la politique fiscale qui importe, en définitive, dans la lutte contre l'inflation. Cette modélisation était toutefois sujette à deux types clé critiques. D'une part, les demandes d'actifs étaient mal justifiées. D'autre part, le schéma d'hyperinflation ignorait l'effet des variations du produit réel, ainsi que leur incidence sur la demande de monnaie. Le modèle que nous présentons à l'intérêt d'analyser simultanément ces mécanismes et de reposer sur des fondements micro-économiques « à la Sidranski ». De surcroît, notre formulation permet de prendre en compte les anticipations des agents relatives aux gains en capital sur leur détention de titres. La considération de coupons fixes en valeur nominale ou indexés est un aspect important du problème traité dans cet article.

Date: 1985
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.persee.fr/doc/reco_0035-2764_1985_num_36_6_408891 (text/html)
Data and metadata provided by Persée are licensed under a Creative Commons "Attribution-Noncommercial-Share Alike 3.0" License http://creativecommons.org/licenses/by-nc-sa/3.0/

Related works:
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:prs:reveco:reco_0035-2764_1985_num_36_6_408891

Access Statistics for this article

Revue Économique is currently edited by Presses de Sciences-Po

More articles in Revue Économique from Programme National Persée
Bibliographic data for series maintained by Equipe PERSEE ().