Theories of Policy Accommodation: The Persistence of Inflation and Gradual Stabilizations

26 Pages Posted: 15 Feb 2006

See all articles by Jose de Gregorio

Jose de Gregorio

Central Bank of Chile; Universidad de Chile; National Bureau of Economic Research (NBER)

Date Written: March 1992

Abstract

Persistent inflation and slow stabilization are usually the result of policy accommodation resorted to in an attempt to avoid the recessionary costs of a sharp reduction of inflation. This paper reviews three explanations for why policymakers despite their dislike of inflation may nevertheless choose to adopt accommodative policies. It emphasizes the role of indexation uncertainty about policymakers` preferences and the existence of fixed costs associated with the implementation of a stabilization program. The paper also presents some evidence on the extent of persistence of inflation across countries.

JEL Classification: E31, E50, E58

Suggested Citation

de Gregorio, Jose, Theories of Policy Accommodation: The Persistence of Inflation and Gradual Stabilizations (March 1992). IMF Working Paper, Vol. , pp. 1-26, 1992. Available at SSRN: https://ssrn.com/abstract=884634

Jose De Gregorio (Contact Author)

Central Bank of Chile ( email )

Agustinas 1180
Santiago
Chile

Universidad de Chile ( email )

Ministry of Finance Teatinos l20 - Piso l2
Santiago
Chile

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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