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Inflation and Reputation with Generic Policy Preferences

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  • Grossman, Herschel I

Abstract

This paper analyzes a reputational equilibrium for inflation under the generic assumption that monetary policy reflects proximate preferences for low expected inflation and positive unexpected inflation. The paper stresses the qualitative implication, that in a reputational equilibrium, the policymaker behaves as if he is concerned about controlling inflation, even though he does not have a direct preference for a low actual inflation rate. The analysis also shows how the equilibrium inflation rate depends on a decision interval that reflects the underlying real objectives of monetary policy and that determines how fast private agents would react to opportunistic behavior by the policymaker. Copyright 1990 by Ohio State University Press.

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  • Grossman, Herschel I, 1990. "Inflation and Reputation with Generic Policy Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 165-177, May.
    • Handle: RePEc:mcb:jmoncb:v:22:y:1990:i:2:p:165-77
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    Cited by:

    1. Grossman, Herschel I., 1991. "Monetary economics : A review essay," Journal of Monetary Economics, Elsevier, vol. 28(2), pages 323-345, October.
    2. Herschel I. Grossman & Suk Jae Noh, 1988. "Proprietary Public Finance, Political Competition, and Reputation," NBER Working Papers 2696, National Bureau of Economic Research, Inc.
    3. Ireland, Peter N., 1997. "Sustainable monetary policies," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 87-108, November.

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