On Price Level Stability, Real Interest Rates and Core Inflation

János Vincze and Sándor Valkovszky ()
Additional contact information
Sándor Valkovszky: Magyar Nemzeti Bank

No 2001/3, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: The paper adresses several issues pertaining to the problem of monetary policy, inflation measurement, and relative prices. After some preliminary empirical analysis showing that the problem must be relevant we set out to conduct a mainly theoretical investigation. If the per period utility function is not homotheoretical counterpants, and their properties, including those that are calculated from them (such as real interest rates), must be interpreted with care. We examine the consequences of goods heterogeneity in the fremwork of a stochastic dynamic equlibrium model without a steady state. To solve the model we posit specific, though we think plausible, assumptions concerning fiscal policy in a small open economy. Conclusions are obtained with important policy implications to the effect that inflation variability may be tolareted, and that the correct meaning and interpretation of real interest rates may run counter to accepted ideas. Our general conclusion is tahat neglecting goods heterogeneity may grossly mislead policy makers and analysts in certain circumstances.

Pages: 41 pages
Date: 2001
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.mnb.hu/letoltes/wp2001-3.pdf (application/pdf)

Related works:
Chapter: On price level stability, real interest rates and core inflation (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2001/3

Access Statistics for this paper

More papers in MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Lorant Kaszab ( this e-mail address is bad, please contact ).