Inflation and Its Variation: An Alternative Explanation

Petra Geraats ()

Center for International and Development Economics Research, Working Paper Series from Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley

Abstract: This paper introduces a general objective function for monetary policy that abandons certainty equivalence and features 'prudence'. It provides an alternative explanation for the positive relation between the level and variability of inflation, both across countries and over time. In particular, the model predicts that high (low) inflation tends to be more variable (stable) over time.

Keywords: inflation; monetary policy; objective functions (search for similar items in EconPapers)
Date: 1999-07-01
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Citations: View citations in EconPapers (9)

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