Considerations in Reducing Inflation From Low to Lower Levels

August 1, 1998

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Format: Chicago

Stephen Tokarick, and Michael P. Leidy Considerations in Reducing Inflation From Low to Lower Levels, (USA: International Monetary Fund, 1998) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In recent years, many countries have successfully reduced their inflation rates to relatively low levels of 2 to 3 percent. The question then arises as to whether it would be desirable to move to even lower rates of inflation. The paper examines the benefits and costs of moving from low inflation to even lower inflation by drawing together recent work on this issue. Once a country has decided to move to an even lower rate of inflation, the question then becomes whether it would be better to achieve this objective through inflation targeting or price-level targeting. The paper critically reviews the arguments for both approaches.

Subject: Inflation, Inflation targeting, Labor, Monetary policy, Price stabilization, Prices, Real interest rates, Sticky prices, Wage adjustments

Keywords: Inflation, Inflation rate, Inflation targeting, Low-inflation environment, Nominal wage, Nominal wage rigidities, Price level, Price stabilization, Price-level target, Price-level uncertainty, Rate of inflation, Sticky prices, Targeted price-level path, Wage adjustments, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1998/109
Stock No:

WPIEA1091998
ISBN:

9781451853186
ISSN:

1018-5941

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