Theories of Policy Accommodation: The Persistence of Inflation and Gradual Stabilizations

March 1, 1992

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Format: Chicago

Jose De Gregorio. Theories of Policy Accommodation: The Persistence of Inflation and Gradual Stabilizations, (USA: International Monetary Fund, 1992) accessed September 27, 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

Persistent inflation and slow stabilization are usually the result of policy accommodation resorted to in an attempt to avoid the recessionary costs of a sharp reduction of inflation. This paper reviews three explanations for why policymakers, despite their dislike of inflation, may nevertheless choose to adopt accommodative policies. It emphasizes the role of indexation, uncertainty about policymakers’ preferences, and the existence of fixed costs associated with the implementation of a stabilization program. The paper also presents some evidence on the extent of persistence of inflation across countries.

Subject: Disinflation, Inflation, Inflation persistence, Prices

Keywords: Disinflation, Ensuing recession, Fixed cost, Full employment, Global, Gradual disinflation, Impulse response function, Indexation component, Inflation, Inflation inertia, Inflation persistence, Model of indexation, Monetary policy, Persistent inflation rates, Phillips curve, Random walk, Rate of inflation, Time series, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/019
Stock No:

WPIEA0191992
ISBN:

9781451843699
ISSN:

1018-5941

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