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Author: Alexander L. Wolman Publisher: ISBN: Category : Languages : en Pages : 30
Book Description
Relative prices of some goods or sectors have long-run trends: For example, the price of services relative to goods has been rising fairly steadily for decades. Other relative prices do not have long-run trends but sometimes fluctuate dramatically from one period to the next. How should monetary policy behave in the face of these trends and fluctuations? I use a model with costly price adjustment to study the optimal rate of inflation when there are trends in relative prices and to construct hypothetical U.S. inflation rates that would have minimized the costs of price adjustment implied by the model.
Author: Alexander L. Wolman Publisher: ISBN: Category : Languages : en Pages : 30
Book Description
Relative prices of some goods or sectors have long-run trends: For example, the price of services relative to goods has been rising fairly steadily for decades. Other relative prices do not have long-run trends but sometimes fluctuate dramatically from one period to the next. How should monetary policy behave in the face of these trends and fluctuations? I use a model with costly price adjustment to study the optimal rate of inflation when there are trends in relative prices and to construct hypothetical U.S. inflation rates that would have minimized the costs of price adjustment implied by the model.
Author: Klaus Adam Publisher: ISBN: Category : Inflation (Finance) Languages : en Pages : 82
Book Description
Using the official micro price data underlying the U.K. consumer price index, we document a new stylized fact for the life-cycle behavior of consumer prices: relative to a narrowly defined set of competing products, the price of individual products tends to fall over the product lifetime. We show that this data feature has important implications for the optimal inflation target. Constructing a sticky-price model featuring a product life cycle and heterogeneous relative-price trends, we derive closed-form expressions for the optimal inflation target under Calvo and menu-cost frictions. We show how the optimal target can be estimated from the observed trends in relative prices. For the U.K. economy, we find the optimal target to be equal to 2.6% in 2016. It has steadily increased over the period 1996 to 2016 due to changes in relative price trends over this period.
Author: Eytan Sheshinski Publisher: MIT Press ISBN: 9780262193320 Category : Business & Economics Languages : en Pages : 546
Book Description
These collected articles constitute what is perhaps the definitive study of pricing models under inflation, providing a solid basis for further research on this elusive question. What are the real effects of inflation? These collected articles constitute what is perhaps the definitive study of pricing models under inflation, providing a solid basis for further research on this elusive question. Covering a broad range of theory and applications by well-known microeconomists, the eighteen contributions evaluate the effects of inflation on aggregate output and on welfare and reveal the scope of recent efforts to explicitly incorporate frictions in economic models. A basic building block common to most of the essays in this volume is the observation that individual firms change nominal prices intermittently. The frequency and size of nominal price changes are influenced by the cost of price adjustment and changes in the economic environment, production costs, market demand, market structure, and most important, inflation. Thus the degree of nominal rigidity is influenced by the economic environment, and in a dynamic context. Two introductory essays survey the empirical studies of pricing policies by individual firms and the theoretical efforts to integrate the nominal rigidities at the micro level into macro relationships. The essays that follow treat the general problem of optimal dynamic adjustment in the presence of convex costs of adjustment, include applications of the inventory models to the case of nominal price adjustment by an individual firm, address the question of aggregation, introduce active search by consumers, and provide empirical analysis of nominal price rigidities.
Author: Michael D. Bordo Publisher: University of Chicago Press ISBN: 0226066959 Category : Business & Economics Languages : en Pages : 545
Book Description
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
Author: Peter J. N. Sinclair Publisher: Routledge ISBN: 1135179778 Category : Business & Economics Languages : en Pages : 402
Book Description
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.
Author: Ricardo Reis Publisher: ISBN: Category : Consumer goods Languages : en Pages : 50
Book Description
This paper uses a dynamic factor model for the quarterly changes in consumption goods' prices to separate them into three components: idiosyncratic relative-price changes, aggregate relative-price changes, and changes in the unit of account. The model identifies a measure of "pure" inflation: the common component in goods' inflation rates that has an equiproportional effect on all prices and is uncorrelated with relative price changes at all dates. The estimates of pure inflation and of the aggregate relative-price components allow us to re-examine three classic macro-correlations. First, we find that pure inflation accounts for 15-20% of the variability in overall inflation, so that most changes in inflation are associated with changes in goods' relative prices. Second, we find that the Phillips correlation between inflation and measures of real activity essentially disappears once we control for goods' relative-price changes. Third, we find that, at business-cycle frequencies, the correlation between inflation and money is close to zero, while the correlation with nominal interest rates is around 0.5, confirming previous findings on the link between monetary policy and inflation.
Author: Arthur M Okun Publisher: Brookings Institution Press ISBN: 0815718721 Category : Business & Economics Languages : en Pages : 382
Book Description
During the past decade Arthur M. Okun, like many economists, focused attention on finding ways to fight inflation without sacrificing goals of high employment and prosperity. In recent years the economy has been plagued by stagflation—the simultaneous persistence of high inflation and high unemployment. Traditional methods of aggregate demand management that have been reasonably successful in curing either one or the other of these problems have not been effective, and the nation has not been able to contain inflation even in periods of economic slack. It now seems clear that the economists’ traditional model that presumes short-run flexibility in wages and prices no longer holds for most of the industrial world, and hence the response of inflation to shifts in macroeconomic policy is weak. In this volume Okun seeks to explain that loss of responsiveness by analyzing how modern labor and product markets work and how they are structured. A central feature of Okun’s analysis is implicit contract theory, which recognizes that efficiency-maximizing decisions by business firms reflect long-term considerations as well as short-term changes in markets. His interpretation of microeconomic behavior and macroeconomic performance provides a basis for the design of policies to deal with stagflation.
Author: Alexander L. Wolman
Author: Alexander L. Wolman
Author: Klaus Adam
Author: Eytan Sheshinski
Author: Bela Csikos-Nagy
Author: Michael D. Bordo
Author: Klaus Adam
Author: Peter J. N. Sinclair
Author: Ricardo Reis
Author: Bengt Assarsson
Author: Arthur M Okun