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Federal Reserve Bank of San Francisco
Working Papers in Applied Economic Theory
Opportunistic and deliberate disinflation under imperfect credibility
Antulio N. Bomfim
Glenn D. Rudebusch
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.


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Antulio N. Bomfim & Glenn D. Rudebusch, Opportunistic and deliberate disinflation under imperfect credibility, Federal Reserve Bank of San Francisco, Working Papers in Applied Economic Theory 97-07, 1997.
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Keywords: Inflation (Finance) ; Monetary policy ; Banks and banking; Central ; Monetary policy - United States
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