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An Evolutionary Theory of Inflation Inertia

Alexis Anagnostopoulos (), Italo Bove, Karl Schlag () and Omar Licandro ()

No 2006-25, Working Papers from FEDEA

Abstract: We provide a simple theory of in.ation inertia in a staggered price setting framework a la Calvo (1983). Contrary to Calvo.s formulation, the frequency of price changes is allowed to vary according to an evolutionary criterion. Inertia is the direct result of gradual adjustment in this frequency following a permanent change in the rate of money growth.

Date: 2006-11
New Economics Papers: this item is included in nep-cba, nep-evo, nep-mac and nep-mon
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Journal Article: An Evolutionary Theory of Inflation Inertia (2007) Downloads
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