Inflation And Output
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| Author | : Mr.Bankim Chadha |
| Publisher | : International Monetary Fund |
| Total Pages | : 36 |
| Release | : 1996-10-01 |
| Genre | : Business & Economics |
| ISBN | : 1451853165 |
This paper examines the distribution of output around capacity when money demand is a nonlinear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of output is shown to be an increasing function of the trend inflation rate. When they result from disturbances to the goods market, the variance of output is a decreasing function of the trend inflation rate. When both disturbances are significant, there exists, in general, a critical non-zero trend inflation rate that minimizes the variance of output.
| Author | : Michael D. Bordo |
| Publisher | : University of Chicago Press |
| Total Pages | : 545 |
| Release | : 2013-06-28 |
| Genre | : Business & Economics |
| ISBN | : 0226066959 |
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
| Author | : Mr.Esteban Jadresic |
| Publisher | : International Monetary Fund |
| Total Pages | : 40 |
| Release | : 1999-04-01 |
| Genre | : Business & Economics |
| ISBN | : 1451848153 |
This paper reexamines the effects of inflation targeting on output stability. It considers an economy with staggered price setting that is exposed to price shocks and where the policymaker cannot observe the current realizations of aggregate output and inflation. The paper shows that, if some price shocks can be anticipated, the effects of inflation targeting depend critically on the inflation indicator being targeted. Specifically, targeting headline inflation can severely destabilize output, while targeting inflation indicator of sticky prices may eliminate that problem and make the response of the output gap to aggregate shocks short-lived.
| Author | : Peter J. N. Sinclair |
| Publisher | : Routledge |
| Total Pages | : 402 |
| Release | : 2009-12-16 |
| Genre | : Business & Economics |
| ISBN | : 1135179778 |
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
| Author | : Michal Andrle |
| Publisher | : International Monetary Fund |
| Total Pages | : 37 |
| Release | : 2017-01-18 |
| Genre | : Business & Economics |
| ISBN | : 1475569165 |
What are the drivers of business cycle fluctuations? And how many are there? By documenting strong and predictable co-movement of real variables during the business cycle in a sample of advanced economies, we argue that most business cycle fluctuations are driven by one major factor. The positive co-movement of real output and inflation convincingly argues for a demand story. We propose a simple statistic that can compare data and models. Based on this statistic, we show that the recent vintage of structural economic models has difficulties replicating the stylized facts we document.
| Author | : Gauti B. Eggertsson |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2013-05-12 |
| Genre | : Business & Economics |
| ISBN | : 9781457845727 |
A rich literature from the 1970s shows that as inflation expectations become more and more ingrained, monetary policy loses its stimulative effect. In the extreme, with perfectly anticipated inflation, there is no trade-off between inflation and output. Recent literature on the interest-rate zero lower bound, however, suggests there may be some benefits from anticipated inflation when the economy is in a liquidity trap. This study reconciles these two views by showing that while it is true that, at positive interest rates, the greater the anticipated inflation the less stimulative are the effects, the opposite holds true at the zero bound. Indeed, at the zero bound, the more the public anticipates inflation, the greater is the expansionary effect of inflation on output. This leads the authors to revisit the trade-off between inflation and output and to show how radically it changes in the face of demand shocks large enough to bring the economy into a liquidity trap. Instead of vanishing once inflation becomes anticipated, the trade-off between inflation and output increases substantially and may become arbitrarily large. In such cases, raising the inflation target in a liquidity trap can be very stimulative. Figures. This is a print on demand report.
| Author | : Mr.Peter B. Clark |
| Publisher | : International Monetary Fund |
| Total Pages | : 60 |
| Release | : 1995-08 |
| Genre | : Business & Economics |
| ISBN | : |
This paper presents empirical evidence supporting the proposition that there is a significant asymmetry in the U.S. output-inflation process, which implies that excess demand conditions are much more inflationary than excess supply conditions are disinflationary. The important policy implication of this asymmetry is that it can be very costly if the economy overheats because this will necessitate a severe tightening in monetary conditions in order to reestablish inflation control. The small model of the U.S. outputinflation process developed in the paper shows that the seeds of large recessions, such as that in 1981-82, are planted by allowing the economy to overheat. This type of asymmetry implies that the measure of excess demand which is appropriate in estimating the Phillips curve cannot have a zero mean; instead, this mean must be negative if inflation is to be stationary. The paper also shows that a failure to account for this important implication of asymmetry can explain why some other researchers may have been misled into falsely accepting the linear model. The empirical results presented in the paper show that the conclusions regarding asymmetry are robust to a number of tests for sensitivity to changes in the method used to estimate potential output and in the specification of the Phillips curve.
| Author | : Ali Alichi |
| Publisher | : International Monetary Fund |
| Total Pages | : 17 |
| Release | : 2015-06-30 |
| Genre | : Business & Economics |
| ISBN | : 1513507567 |
The gap between potential and actual output—the output gap—is a key variable for policymaking. This paper adapts the methodology developed in Blagrave and others (2015) to estimate the path of output gap in the U.S. economy. The results show that the output gap has considerably shrunk since the Great Recession, but still remains negative. While the results are more robust than other existing methodologies, there is still significant uncertainty surrounding the estimates.
| Author | : Francesco Grigoli |
| Publisher | : International Monetary Fund |
| Total Pages | : 35 |
| Release | : 2015-01-23 |
| Genre | : Business & Economics |
| ISBN | : 1498375855 |
Output gap estimates are subject to a wide range of uncertainty owing to data revisions and the difficulty in distinguishing between cycle and trend in real time. This is important given the central role in monetary policy of assessments of economic activity relative to capacity. We show that country desks tend to overestimate economic slack, especially during recessions, and that uncertainty in initial output gap estimates persists several years. Only a small share of output gap revisions is predictable ex ante based on characteristics like output dynamics, data quality, and policy frameworks. We also show that for a group of Latin American inflation targeters the prescriptions from typical monetary policy rules are subject to large changes due to output gap revisions. These revisions explain a sizable proportion of the deviation of inflation from target, suggesting this information is not accounted for in real-time policy decisions.
| Author | : David Culloden Rowan |
| Publisher | : |
| Total Pages | : 536 |
| Release | : 1968 |
| Genre | : Great Britain |
| ISBN | : |
