Models of Inflation and the Costs of Disinflation

Guy Meredith, Bankim Chadha and Paul Masson

No 1991/097, IMF Working Papers from International Monetary Fund

Abstract: This paper focuses on the output costs of disinflation. A model of inflation with both forward and backward elements seems to characterize reality. Such an inflation model is estimated using data for industrial countries, and the output costs of a disinflation path are calculated, first analytically in a simple theoretical model, then by simulation of a global, multi-region empirical model. The credibility of a preannounced path for money consistent with the lowest output loss is considered. An alternative, more credible policy may be to announce an exchange rate peg to a low inflation currency.

Keywords: WP; rate of inflation; money supply; price level; disinflation path; inflation equation; disinflation program; inflation stickiness; nominal interest rate; Phased-in disinflation; Inflation; Disinflation; Capacity utilization; Monetary base; Demand for money; North America; Europe (search for similar items in EconPapers)
Pages: 34
Date: 1991-10-01
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Citations: View citations in EconPapers (44)

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Related works:
Chapter: Models of Inflation and the Costs of Disinflation (2019)
Journal Article: Models of Inflation and the Costs of Disinflation (1992)
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