Why Does High Inflation Raise Inflation Uncertainty?

34 Pages Posted: 27 Apr 2000 Last revised: 26 Oct 2022

See all articles by Laurence Ball

Laurence Ball

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER); International Monetary Fund (IMF)

Date Written: January 1990

Abstract

This paper presents a model of monetary policy in which a rise in inflation raises uncertainty about future inflation. When inflation is low, there is a consensus that the monetary authority will try to keep it low. When inflation is high, policymakers face a dilemma: they would like to disinflate, but fear the recession that would result. The public does not know the tastes of future policymakers, and thus does not know whether disinflation will occur.

Suggested Citation

Ball, Laurence M., Why Does High Inflation Raise Inflation Uncertainty? (January 1990). NBER Working Paper No. w3224, Available at SSRN: https://ssrn.com/abstract=226711

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