CONTRACTS, CREDIBILITY, AND COMMON KNOWLEDGE - THEIR INFLUENCE ON INFLATION CONVERGENCE
UNSPECIFIED. (1993) CONTRACTS, CREDIBILITY, AND COMMON KNOWLEDGE - THEIR INFLUENCE ON INFLATION CONVERGENCE. INTERNATIONAL MONETARY FUND STAFF PAPERS, 40 (1). pp. 178-201. ISSN 0020-8027Full text not available from this repository.
In this paper, three possible reasons are examined for a sluggish inflation response to a hard-currency peg. Models of overlapping wage contracts are analyzed and shown to generate little inertia. These findings are contrasted with the effects of government credibility and the speed of private sector learning, which are shown to have a major impact on the speed of inflation adjustment. But even if individual agents believe the government will not devalue its currency, it is shown that inflation inertia can still arise if these expectations are not common knowledge.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HG Finance
H Social Sciences > HC Economic History and Conditions
|Journal or Publication Title:||INTERNATIONAL MONETARY FUND STAFF PAPERS|
|Publisher:||INT MONETARY FUND|
|Number of Pages:||24|
|Page Range:||pp. 178-201|
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