Considerations in Reducing Inflation From Low to Lower Levels
August 1, 1998
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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
Pages:
20
Volume:
1998
DOI:
Issue:
109
Series:
Working Paper No. 1998/109
Stock No:
WPIEA1091998
ISBN:
9781451853186
ISSN:
1018-5941
