Study finds optimal positive inflation key to economic stability and growth
The research shows that having a positive level of inflation in the long run can be beneficial due to factors like inefficient natural output levels and the desire to stabilize output. This is because positive inflation can lead to a continuous positive output gap. The study suggests that inflation persistence, which makes it costly to reduce inflation, can create an incentive for positive inflation. This optimal positive inflation can occur in different economic models, even without a detailed microfoundation. Overall, the findings support the idea that having a steady, positive level of inflation can be a good thing for the economy.