Nominal Exchange Rate Anchoring Under Inflation Inertia:

This paper develops a theory of inflation inertia based on forward looking staggered price setting in the nontradable goods sector of a small open economy. Unlike current theories of sticky prices, transitions to a lower steady state inflation rate take time even if they are fully credible, and they...

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1. Verfasser: Calvo, Guillermo (VerfasserIn)
Format: Elektronisch E-Book
Sprache:English
Veröffentlicht: Washington, D.C International Monetary Fund 2002
Schriftenreihe:IMF Working Papers Working Paper No. 02/30
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Zusammenfassung:This paper develops a theory of inflation inertia based on forward looking staggered price setting in the nontradable goods sector of a small open economy. Unlike current theories of sticky prices, transitions to a lower steady state inflation rate take time even if they are fully credible, and they are associated with significant output losses in nontradables There is a welfare trade-off between these output losses and the gains from smaller inflationary distortions. Gains exceed losses for most calibrations. The optimal steady state is the Friedman rule
Beschreibung:1 Online-Ressource (36 p)
ISBN:1451844921
9781451844924

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