Return the output effect of stopping inflation when velocity is time varying

Evans, Lynne; Nicolae, Anamaria

Abstract

This paper explores the effect of time varying velocity in a transition to price stability. Nonstationary velocity, expressed asfunction of consumption, is made endogenous in Ireland's (1997) model. We find that the disinflationary booms found by Ball(1994) may or may not disappear; and also that temporary output losses may be much larger than previously thought, dependingon velocity. A gradual disinflation of low inflation may even be undesirable given its overall negative impact on the economy.Finally, we explore the optimal speed of disinflation.

Citation

Evans, L., & Nicolae, A. (2007). Return the output effect of stopping inflation when velocity is time varying

• Working Paper Type: Working Paper
• Publication Date: Aug 1, 2007
• Deposit Date: Dec 7, 2012
• Publicly Available Date: Dec 7, 2012
• Series Title: Durham University Business School Economics Finance Accounting Working Papers
• Keywords: Price stability, Velocity, Disinflation, Output boom, Optimal speed of disinlfation, JEL classifcation: E20 E32 F32 F41.
• Public URL: https://durham-repository.worktribe.com/output/1699685
• Publisher URL: http://www.dur.ac.uk/business/faculty/working-papers/