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

Nolan, C. and Nicolae, A. (2006) 'The impact of imperfect credibility in a transition to price stability.', Journal of money, credit and banking., 38 (1). pp. 47-66.

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.

Item Type:Article
Keywords:Price stability, Imperfect credibility, Optimal speed of disinflation.
Full text:PDF - Published Version (365Kb)
Status:Peer-reviewed
Publisher Web site:http://web.econ.ohio-state.edu/jmcb/Volume38No1.php
Publisher statement:Copyright of Journal of Money, Credit & Banking is the property of Ohio State University Press and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts).
Record Created:21 Aug 2008
Last Modified:23 Aug 2011 10:01

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