Open AccessAN EVOLUTIONARY THEORY OF INFLATION INERTIA
Author(s) -
Anagnostopoulos Alexis,
Licandro Omar,
Bove Italo,
Schlag Karl
Publication year - 2007
Publication title -
journal of the european economic association
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 7.792
H-Index - 93
eISSN - 1542-4774
pISSN - 1542-4766
DOI - 10.1162/jeea.2007.5.2-3.433
Subject(s) - inflation (cosmology) , classics , library science , history , computer science , theoretical physics , physics
We provide a simple theory of inflation inertia in a staggered price setting framework à la Calvo (1983). Contrary to Calvo's formulation, the frequency of price changes is allowed to vary according to an evolutionary criterion. Inertia is the direct result of gradual adjustment in this frequency following a permanent change in the rate of money growth. (JEL: E31)
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