The Genesis of Inflation and the Costs of Disinflation
25 Pages Posted: 1 Mar 2007 Last revised: 29 Nov 2022
Date Written: February 1991
Abstract
This essay asks how high inflation arises and why it is costly to eliminate. Specifically, the paper discusses the roles of price rigidity and credibility problems in explaining the costs of disinflation; the puzzle of persistent inflation triggered by onetime macroeconomic shocks; and the case for returning to adaptive expectations in theories of inflation.
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