On Nonlinear Effects of Inflation Across Countries

25 Pages Posted: 31 Dec 2018

See all articles by Chao He

Chao He

East China Normal University (ECNU)

Date Written: December 13, 2018

Abstract

Many emerging market economies have a higher tolerance for inflation than industrialized economies. Recent empirical studies find nonlinear effects of inflation and that the threshold rate is higher for emerging countries. Motivated by the fact that emerging countries have higher business costs, this paper incorporates entrepreneurial occupational choices in a parsimonious monetary model and rationalizes the observed different thresholds rates. The reason is that business costs distort the occupational decisions and affect the inflation-output tradeoff.

Keywords: monetary policy, inflation, entrepreneurship, business costs, nonlinear effects

JEL Classification: E31, E41, E52, E58, J24, L26

Suggested Citation

He, Chao, On Nonlinear Effects of Inflation Across Countries (December 13, 2018). Available at SSRN: https://ssrn.com/abstract=3300610 or http://dx.doi.org/10.2139/ssrn.3300610

Chao He (Contact Author)

East China Normal University (ECNU) ( email )

North Zhongshan Road Campus
3663 N. Zhongshan Rd.
Shanghai, 200062
China

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