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Temporary Acceleration of Inflation: What Can a Central Bank Learn from It?

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  • Hilde Patron

Abstract

In this article I present a model in which the monetary authority conducts policy by setting money supply in the presence of uncertainty and Bayesian learning about the economic environment. I find that there exists a set of assumptions under which a temporary acceleration of money growth and thus of inflation increases the government's overall expected utility. There also exists a set of assumptions under which a temporary deceleration of money growth and thus of inflation increases the government's overall expected utility.

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  • Hilde Patron, 2005. "Temporary Acceleration of Inflation: What Can a Central Bank Learn from It?," Southern Economic Journal, John Wiley & Sons, vol. 71(4), pages 737-751, April.
    • Handle: RePEc:wly:soecon:v:71:y:2005:i:4:p:737-751
    DOI: 10.1002/j.2325-8012.2005.tb00673.x
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