The Macroeconomic Effects of Non-Zero Trend Inflation

Robert Amano, Steven Ambler () and Nooman Rebei

Staff Working Papers from Bank of Canada

Abstract: The authors study the macroeconomic effects of non-zero trend inflation in a simple dynamic stochastic general-equilibrium model with sticky prices. They show that trend inflation leads to a substantial reduction in the stochastic means of output, consumption, and employment. It also leads to an increase in the variability and persistence of most aggregates. Price dispersion across firms unambiguously increases the welfare costs of inflation. The effects hold qualitatively no matter how sticky prices are modelled, but they are quantitatively much stronger under Calvo pricing.

Keywords: Business fluctuations and cycles; Economic models; Inflation and prices; Inflation targets (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp06-34.pdf

Related works:
Journal Article: The Macroeconomic Effects of Nonzero Trend Inflation (2007)
Journal Article: The Macroeconomic Effects of Nonzero Trend Inflation (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:bca:bocawp:06-34

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().