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UNCERTAIN EFFECTS OF MONEY AND THE LINK BETWEEN THE INFLATION RATE AND INFLATION UNCERTAINTY
Author(s) -
HOLLAND A. STEVEN
Publication year - 1993
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1993.tb00864.x
Subject(s) - economics , inflation (cosmology) , monetary economics , real interest rate , inflation rate , price level , monetary policy , keynesian economics , macroeconomics , physics , theoretical physics
In the postwar period high rates of inflation are associated with high levels of inflation uncertainty. In this paper I argue that the inflation rate and inflation uncertainty are linked by forecasters' uncertainty about the impact of money growth on the price level, and I present evidence indicating that this has been the case. As long as the impact of money growth on the price level remains unpredictable, then even predictable money growth will cause inflation uncertainty with its accompanying adverse effects on employment and output.