Models of Inflation and the Costs of Disinflation

34 Pages Posted: 15 Feb 2006

See all articles by Bankim Chadha

Bankim Chadha

affiliation not provided to SSRN

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Guy Meredith

International Monetary Fund (IMF) - Research Department

Date Written: October 1991

Abstract

This paper focuses on the output costs of disinflation. A model of inflation with both forward and backward elements seems to characterize reality. Such an inflation model is estimated using data for industrial countries, and the output costs of a disinflation path are calculated, first analytically in a simple theoretical model, then by simulation of a global, multi-region empirical model. The credibility of a preannounced path for money consistent with the lowest output loss is considered. An alternative, more credible policy may be to announce an exchange rate peg to a low inflation currency.

JEL Classification: E31, E52

Suggested Citation

Chadha, Bankim and Masson, Paul R. and Meredith, Guy, Models of Inflation and the Costs of Disinflation (October 1991). IMF Working Paper No. 91/97, Available at SSRN: https://ssrn.com/abstract=885081

Bankim Chadha (Contact Author)

affiliation not provided to SSRN

No Address Available

Paul R. Masson

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

The Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6278 (Phone)
202-797-2968 (Fax)

Guy Meredith

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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