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This paper presents a new mechanism through which monetary policy rules affect inflation persistence. When assuming that price reset hazard functions are not constant, backward-looking dynamics emerge in the NKPC. This new mechanism makes the traditional demand channel of monetary transmission have a long-lasting effect on inflation dynamics. The Calvo model fails to convey this insight, because its constant hazard function leads those important backward-looking dynamics to be canceled out. I first analytically show how it works in a simple setup, and then solve a log-linearized model numerically around positive trend inflation. With realistic calibration of trend inflation and the monetary policy rule, the model can account for the pattern of changes in inflation persistence observed in the post-wwii U.S. data. In addition, with increasing hazard functions, the 'Taylor principle' is sufficient to guarantee the determinate equilibrium even under extremely high trend inflation.

Describes the computable general equilibrium (CGE) model's structure. Examines the IDI hypothesis in the context of a CGE model tailored to the structural rigidities of the economy under Sandinista rule. Demonstrates that properly specified, the model does not show a pronounced tendency towards the cycle. There is an improvement in income distribution even when the foreign exchange saving brought about by devaluation is used to repay debt or increase reserves. (SJK)

We examine the predictive relationship between various measures of inflation expectations and future inflation. We find that the expectations of professional economists and of businesses have tended to provide more accurate predictions of future inflation than the expectations of households and of financial market participants. However, the forecasts coming from a relatively simple and popular benchmark inflation forecasting model have historically been roughly as accurate as the expectations of businesses and professional economists.

PurposeThe Ghanaian economy has experienced relative stability, improved macroeconomic performance and resilience over the past few years, following the introduction of a new monetary policy framework called inflation targeting (IT). The purpose of this paper is to look at IT and its effect on inflation management in Ghana.Design/methodology/approachThe study employed monthly time series data from 1980 to 2009.FindingsThe results gathered in this study demonstrate that IT has had a significant impact on the reduction of inflation series in recent years and has reduced the persistence of inflation series considerably. It is largely amplified that the implementation of an IT framework in Ghana has been a success and has contributed to a change in the conduct of monetary policy towards best practice.Research limitations/implicationsThe study could have used a lot more macroeconomic variables.Practical implicationsThe paper's findings are very important for Central Banks that are using the IT framework, or planning to do so, for efficiency and effectiveness.Originality/valueThe paper is the first of its kind for developing countries, especially in Africa and Ghana for that matter.

Wie soll der Staat auf die hohen Preise reagieren? Zwar werden wir, wie Robert Habeck angekündigt hat, durch die Preisschocks alle ärmer. Wer aber genau wie arm wird, lässt sich politisch steuern.