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Output Effects of Disinflation with Staggered Price Setting
Author(s) -
Carlson John A.
Publication year - 2002
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2002.tb00468.x
Subject(s) - disinflation , economics , monetary economics , recession , keynesian economics , variety (cybernetics) , econometrics , monetary policy , mathematics , statistics
A discrete‐time model with staggered price setting is shown to be flexible enough to analyze a variety of scenarios in which policymakers may introduce disinflation. While a recession need not necessarily occur, a semicredible disinflation (i.e., when price setters believe a new lower money growth rate will continue but do not act on future reductions) unambiguously depresses output with staggered prices, no matter how rapidly or slowly the disinflation is introduced.