A Prize Worth Having: The IMF and Price Stability

Anne Krueger

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This essay assesses the benefits of a low-inflation environment for the world economy. To start, the main costs of inflation are reviewed—namely, how it distorts the calculus of profitability, encouraging short-term projects at the expense of longer-term investment and diminishing the value of relative price signals. Then, the progress that most countries have made in recent years toward achieving low inflation is reviewed. The new low-inflation environment has brought noticeable gains—faster global growth, increased stability, and reduced vulnerability. The role of the IMF in helping foster a low-inflation environment is also discussed, highlighting the Fund’s important support for policy reform efforts in its member countries. To conclude, the essay identifies future challenges for economists and policymakers: locking in the benefits of low inflation, identifying how far policies should go toward lowering inflation further, and expanding the knowledge frontiers on the transition toward adopting inflation targeting.

Date: 2006-12
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Chapter: A Prize Worth Having: The IMF and Price Stability (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:397

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