Board of Governors of the Federal Reserve System (U.S.)
Finance and Economics Discussion Series
Opportunistic and deliberate disinflation under imperfect credibility
One 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 disinflations.
Antulio N. Bomfim & Glenn D. Rudebusch, Opportunistic and deliberate disinflation under imperfect credibility, Finance and Economics Discussion Series 1998-01, Board of Governors of the Federal Reserve System (U.S.), 1998.
Keywords: Inflation (Finance)
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