On the 'conquest' of inflation

Andrea Gerali () and Francesco Lippi

No 444, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Sargent (1999) warns that if policymakers� views on the unemployment - inflation tradeoff are driven by empirical correlations rather than theory, disinflations (escapes from high to low inflation) may periodically occurr but are not bound to last. This paper asks how different inflation objectives on the part of the policymaker affect this result. We show that escapes in the neighborhood of zero inflation are less frequent and have a shorter duration as policy objectives become more inflation-averse. A sufficiently (but not infinitely) inflationaverse policymaker never escapes Nash inflation and, on average, yields a lower inflation rate.

Keywords: inflation bias; disinflation; learning; conservative bankers (search for similar items in EconPapers)
JEL-codes: E5 (search for similar items in EconPapers)
Date: 2002-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: On the 'Conquest' of Inflation (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_444_02

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