Credibility, disinflation and gradualism
Economics LettersPublished 1 January 1985
Olivier Blanchard
Citations26
SJR quartileQ2
SJR score0.76
SNIP0.98
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Abstract
The following conundrum is examined: Success or failure of a disinflation policy depends largely on expectations of maintained lower money growth. This suggests two equilibria: (a) A policy is expected to be maintained and succeeds; Policy makers are re-elected, maintaining the policy and validating initial expectations. (b) A policy is not expected to be maintained and fails; Policy makers are not re-elected. The policy is not maintained, validating initial expectations.
Keywords
Economics, Econometrics and Finance