Two Models Of Inflation Control
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Two Models Of Inflation Control
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Author : Irene D. Darius
language : en
Publisher:
Release Date : 1980
Two Models Of Inflation Control written by Irene D. Darius and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1980 with Economic development categories.
In recent years, rising inflation and low levels of output growth have plagued western economies. Fiscal and monetary policies to lower inflation often put downward pressure on output, while fiscal and monetary policies to stimulate output raise the inflation rate. There fore, inflation control programs, believed to raise output and lower inflation, have become a popular government policy in Great Britain, the United States and Canada. While inflation control programs have been observed to increase the level of output and lower the rate of inflation in the long-run, periods of lower levels of output exist in the short-run. It is the aim of this paper to capture these observed findings in two macro-economic models incorporating a voluntary inflation control program. The basic model to which the controls are being applied has received extensive study. Model 1 assumes the control program affects inflationary expectations only. Model 2 assumes the control program affects both inflationary expectations and the demand for real money. The method of study employed for both models is one of coirparative statics and phase diagrams. IVo differential equations are formulated one for the real rate of interest and the other for the nominal rate of interest. From these equations the stability conditions are evaluated and examined. Assuming these conditions are satisfied during the control program, phase diagrams and the short-run time paths are drawn to show the movement of the actual inflation rate, expectations, output, the real interest rate, and the nominal interest rate to their long-run equilibrium positioq. The analysis of the long-run equilibrium follows the short-run analysis. Finally, an examination of the post-control period completes the study for both models. The results of both models are similar. In the short-run, cyclical fluctuations of all the endogenous variables may exist. The rate of inflation does fall teirporarily in the short-run, but the level of output also falls. The long-run equilibrium is one of a higher level of output, and lower inflationary expectations, real interest rate and nominal interest rate in both models. In Model 1, the actual rate of inflation is the same as its pre-control equilibrium rate, while in Model 2 the rate of inflation is lowered from its pre-control rate. In both models, the post-control equilibrium position is the same as the pre-control equilibrium position. Therefore, unless the control program remains on indefinitely, the inflation control program can only be a temporary policy to lower the inflation rate and raise the level of output.
Inflation Expectations
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Author : Peter J. N. Sinclair
language : en
Publisher: Routledge
Release Date : 2009-12-16
Inflation Expectations written by Peter J. N. Sinclair and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-12-16 with Business & Economics categories.
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
A Model For The Optimal Management Of Inflation
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Author : Salvatore Federico
language : en
Publisher:
Release Date : 2019
A Model For The Optimal Management Of Inflation written by Salvatore Federico and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Consider a central bank that can adjust the in ation rate by increasing and decreasing the level of the key interest rate. Each intervention gives rise to proportional costs, and the central bank faces also a running penalty, e.g., due to misaligned levels of in ation and interest rate. We model the resulting minimization problem as a Markovian degenerate two-dimensional bounded-variation stochastic control problem. Its characteristic is that the mean-reversion level of the diffusive in ation rate is an affine function of the purely controlled interest rate's current value. By relying on a combination of techniques from viscosity theory and free-boundary analysis, we provide the structure of the value function and we show that it satisfies a second-order smooth-fit principle. Such a regularity is then exploited in order to determine a system of functional equations solved by the two monotone curves that split the control problem's state space in three connected regions.
Understanding Inflation Persistence
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Author : Huw Dixon
language : en
Publisher:
Release Date : 2006
Understanding Inflation Persistence written by Huw Dixon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Inflation (Finance) categories.
Capacity Constraints Inflation And The Transmission Mechanism
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Author : Mr.Peter B. Clark
language : en
Publisher: International Monetary Fund
Release Date : 1995-08
Capacity Constraints Inflation And The Transmission Mechanism written by Mr.Peter B. Clark and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995-08 with Business & Economics categories.
This paper develops a small model of the output-inflation process in the United States in order to examine the implications of alternative monetary policy rules. In particular, two types of policy rules are considered; a myopic rule where interest rates respond contemporaneously to output and inflation and a forward-looking policy rule that exploits information about the nature of transmission mechanism in the setting of interest rates. The model has two key features. First, there are significant lags between interest rates and aggregate demand conditions. Second, the model is based on an asymmetric model of inflation where positive deviations of aggregate demand from potential are more inflationary than negative deviations are disinflationary. As a consequence of this asymmetry, a policymaker that follows a myopic policy rule and allows the economy to overheat periodically will be forced to impose large recessions on the economy to keep inflation under control. The paper shows that the estimated degree of asymmetry implies that myopic policies can result in significant permanent losses in output. By contrast, policymakers that follow a forward-looking policy rule that avoids overheating will not only reduce the variance of output but also raise the mean level of output.
Macroeconomic Policy
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Author : Martin Weale
language : en
Publisher: Routledge
Release Date : 2015-10-05
Macroeconomic Policy written by Martin Weale and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-10-05 with Business & Economics categories.
This analysis of macroeconomic policy, originally published in 1989, argues that key government objectives, such as reduced inflation, decreased unemployment and an adequate level of national saving can be achieved only by employing both monetary and fiscal policies, in conjunction with supply-side policies expressly designed to improve the workings of the labour market. Part 1 is a comparative analysis showing the effects of monetary and fiscal policy on the economy. Real-wage rigidity in the labour market is shown to have important consequences for the working of both types of policy, because it conditions the economy’s response to tax changes. Part 2 presents an econometric model which combines consistent stock-flow accounts with a full range of expectational effects. Part 3 presents an innovative technique for solving rational expectations models with the need for arbitary terminal conditions.
Economic Policy And The Great Stagflation
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Author : Alan S. Blinder
language : en
Publisher: Elsevier
Release Date : 2013-09-11
Economic Policy And The Great Stagflation written by Alan S. Blinder and has been published by Elsevier this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-09-11 with Business & Economics categories.
Economic Policy and the Great Stagflation discusses the national economic policy and economics as a policy-oriented science. This book summarizes what economists do and do not know about the inflation and recession that affected the U.S. economy during the years of the Great Stagflation in the mid-1970s. The topics discussed include the basic concepts of stagflation, turbulent economic history of 1971-1976, anatomy of the great recession and inflation, and legacy of the Great Stagflation. The relation of wage-price controls, fiscal policy, and monetary policy to the Great Stagflation is also elaborated. This publication is beneficial to economists and students researching on the history of the Great Stagflation and policy errors of the 1970s.
A Two Factor Model Of Inflation Uncertainty And The Evidence
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Author : Peijie Wang
language : en
Publisher:
Release Date : 1998
A Two Factor Model Of Inflation Uncertainty And The Evidence written by Peijie Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Inflation (Finance) categories.
The Information Content Of Money In Forecasting Euro Area Inflation
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Author : Helge Berger
language : en
Publisher: International Monetary Fund
Release Date : 2008-07
The Information Content Of Money In Forecasting Euro Area Inflation written by Helge Berger and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-07 with Business & Economics categories.
We develop a tractable open-economy new-Keynesian model with two sectors to analyze the short-term effects of aid-financed fiscal expansions. We distinguish between spending the aid, which is under the control of the fiscal authorities, and absorbing the aid-using the aid to finance a higher current account deficit-which is influenced by the central bank's reserves policy when access to international capital markets is limited. The standard treatment of the transfer problem implicitly assumes spending equals absorption. Here, in contrast, a policy mix that results in spending but not absorbing the aid generates demand pressures and results in an increase in real interest rates. It can also lead to a temporary real depreciation if demand pressures are strong enough to threaten external balance. Certain features of low income countries, such as limited participation in domestic financial markets, make a real depreciation more likely by amplifying demand pressures when aid is spent but not absorbed. The results from our model can help understand the recent experience of Uganda, which saw an increase in government spending following a surge in aid yet experienced a real depreciation and an increase in real interest rates.
Two Sector Models Of Inflation And Recession
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Author : John Burbidge
language : en
Publisher: Hamilton, Ont. : Department of Economics, McMaster University
Release Date : 1977
Two Sector Models Of Inflation And Recession written by John Burbidge and has been published by Hamilton, Ont. : Department of Economics, McMaster University this book supported file pdf, txt, epub, kindle and other format this book has been release on 1977 with Inflation (Finance) categories.