Evans, Lynne and Nicolae, Anamaria (2007) 'Return the output effect of stopping inflation when velocity is time varying.', Working Paper. Durham University, Durham.
This paper explores the effect of time varying velocity in a transition to price stability. Nonstationary velocity, expressed asfunction of consumption, is made endogenous in Ireland's (1997) model. We find that the disinflationary booms found by Ball(1994) may or may not disappear; and also that temporary output losses may be much larger than previously thought, dependingon velocity. A gradual disinflation of low inflation may even be undesirable given its overall negative impact on the economy.Finally, we explore the optimal speed of disinflation.
|Item Type:||Monograph (Working Paper)|
|Keywords:||Price stability, Velocity, Disinflation, Output boom, Optimal speed of disinlfation, JEL classifcation: E20 E32 F32 F41.|
|Full text:||PDF - Published Version (183Kb)|
|Publisher Web site:||http://www.dur.ac.uk/business/faculty/working-papers/|
|Record Created:||07 Dec 2012 10:37|
|Last Modified:||07 Dec 2012 13:06|
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