Federal Reserve Bank of San Francisco
Working Papers in Applied Economic Theory
Opportunistic and deliberate disinflation under imperfect credibility
On strategy for disinflation prescribes a deliberate path towards low inflation. A contrasting opportunistic approach eschews deliberate action and instead waits for unforeseen shocks to reduce inflation. This paper compares the ability of these two approaches to achieve disinflation-and at what cost. We analyze these issues using the Federal Reserve's FRB/US model, which allows alternative assumptions to be made about expectations held by agents in the economy; hence, the credibility of the central bank can be considered in assessing the cost of deliberate and opportunistic disinflation.
Antulio N. Bomfim & Glenn D. Rudebusch, Opportunistic and deliberate disinflation under imperfect credibility, Working Papers in Applied Economic Theory 97-07, Federal Reserve Bank of San Francisco, 1997.
Keywords: Inflation (Finance) ; Monetary policy ; Banks and banking; Central ; Monetary policy - United States
For corrections, contact Diane Rosenberger ()