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The impact of imperfect credibility in a transition to price stability

Nicolae, A.; Nolan, C.

The impact of imperfect credibility in a transition to price stability Thumbnail


Authors

C. Nolan



Abstract

In this paper we study the impact of a temporary lack of credibility in a transition to price stability.We quantify the effects of a period of disinflation on temporary output losses, and the impact of the lack of credibility on the optimal speed of disinflation. We demonstrate that the "disinflationary booms" found by Ball (1994) and Ireland (1997) may or may not disappear in an environment with imperfect credibility, depending on the speed of learning relative to the speed of disinflation. Finally, we enquire whether the speed of the Volcker disinflation was excessive or not.

Citation

Nicolae, A., & Nolan, C. (2006). The impact of imperfect credibility in a transition to price stability. Journal of Money, Credit and Banking, 38(1), 47-66

Journal Article Type Article
Publication Date 2006-02
Deposit Date Aug 21, 2008
Publicly Available Date Mar 28, 2024
Journal Journal of Money, Credit and Banking
Print ISSN 0022-2879
Electronic ISSN 1538-4616
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 38
Issue 1
Pages 47-66
Keywords Price stability, Imperfect credibility, Optimal speed of disinflation.
Public URL https://durham-repository.worktribe.com/output/1631733
Publisher URL http://web.econ.ohio-state.edu/jmcb/Volume38No1.php

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