Economics, Econometrics and Finance
4 years ago

Monetary policy model reveals how tough decisions can control inflation spikes.

1 view
RePEc: Research Papers in Economics
Time-Consistent Policy and Persistent Changes in Inflation
Laurence Ball

Paper Summary

The paper explains how changes in inflation happen over time due to supply shocks and tough policymaking. When supply shocks occur, inflation goes up for a long time. To bring inflation down, policymakers create recessions. The paper also suggests a way to pick the best solution in models of monetary policy that go on forever.

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