یک مدل ساده از کاهش تورم و بهینه بی عملی

This paper analyses the optimal monetary policy of a government facing an election whose disinflationary ‘abilities’ are uncertain, under the assumption that reducing inflation is costly because of backward-looking contracts. It is shown that if the government likes to be in power it can choose to ‘do nothing’ on the inflation front in order to avoid risking electoral defeat should disinflation prove too costly. The costs of inflation reduction are worth bearing if initial inflation is sufficiently high: therefore it is possible to observe quick disinflations that however stop short of low inflation.