Research on the Inflation Cost Evaluation and Appropriate Inflation Management Based on the Taylor Rule

Shiqing Sheng ()
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Shiqing Sheng: University of St. Andrews

A chapter in Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022), 2023, pp 558-565 from Springer

Abstract: Abstract Inflation has a number of negative effects, including the potential for reducing investment and slowing economic development due to volatility and uncertainty. Inflation can reduce an individual's savings value and shift the income away from savers to lenders and people with assets in society. When inflation reaches dangerously high levels, society can become unstable and people's faith in the economy might be lost. This paper evaluates the costs of inflation and how to manage inflation in an appropriate way by introducing the Taylor rule, a targeting monetary policy used by central banks to control inflation. According to the Taylor Rule, the Federal Reserve should raise rates when inflation exceeds the desired level or when GDP growth exceeds its potential.

Keywords: Real money balance; Menu cost; Price level target; Zero inflation target; Taylor rule (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-054-1_60

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DOI: 10.2991/978-94-6463-054-1_60

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