Opportunistic and deliberate disinflation under imperfect credibility
Abstract: 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.
File(s): File format is application/pdf http://www.frbsf.org/econrsrch/workingp/wp97-07.pdf
Provider: Federal Reserve Bank of San Francisco
Part of Series: Working Papers in Applied Economic Theory
Publication Date: 1997