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| Author: | Einarsson, T. Marquis, M. H. |
| Title: | Transitional and steady-state costs of disinflation when growth is endogenous |
| Journal: | Economica
1999 : NOV, VOL. 66:264, p. 489-508 |
| Index terms: | Employment Output Economic policy Models |
| Freeterms: | Disinflation Economic impact |
| Language: | eng |
| Abstract: | In a monetary version of the Uzawa (1965)-Lucas (1988) model of endogenous growth, it is illustrated how a credible policy of rapid disinflation can induce temporary declines in employment and output. However, temporary declines in employment and output are not associated with any nominal rigidities in the economy, and therefore do not represent dead-weight losses that occur along the transition path, but are instead a part of an optimal response to the policy change. The measured welfare benefits of disinflation are seen to be higher when the transition path is taken into account. |
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