The NAIRU is the rate of unemployment consistent with stable inflation... An important challenge in setting economic policy is to identify the rate of capacity utilisation that is sustainable, in the sense that it is associated with reasonably stable inflation. There are different ways of measuring capacity utilisation. Looking at perhaps the most common measure, unemployment, this idea of sust...

The conventional policy perspective is that lowering the interest rate increases output and inflation in the short run, while maintaining inflation at a higher level requires a higher interest rate in the long run. In contrast it has been argued that a Neo-Fisherian policy of setting an interest-rate peg at a fixed higher level will increase the inflation rate. We show that adaptive learning ar...

A popular model in the literature postulates an interest rate rule, a NAIRU price equation, and an aggregate demand equation in which aggregate demand depends on the real interest rate. In this model a positive inflation shock with the nominal interest rate held constant is explosive because it increases aggregate demand (because the real interest rate is lower), which increases inflation throu...

This paper argues that inflation-targeting central banks should announce explicit loss function with numerical relative weights on output-gap stabilization and use and announce optimal time-varying instrument-rate paths and corresponding inflation and output-gap forecasts. Simple voting procedures for forming the Monetary Policy Committee’s aggregate loss function and time-varying instrument-ra...

The paper identifies monetary economic features of the post-transition Croatian economy, with a view towards using inflation rate targeting to reach European Union (EU) inflation targets as required by EU accession. If focuses on the demand for real money balances, the Fisher equation of interest rates, and the effect of nominal money on output, for Croatia over the 1994-2002 period. The real m...

N recent years, many countries have experienced “stagflation,” a period of high and rising inflation and unemployment. Over this time, higher inflation increasingly has come to be blamed for higher unemployment and reduced growth of real output. This contrasts sharply with previously held notions that there was either a long-run tradeoff between inflation and unemployment or a “natural rate of ...

ABSTRACTÂ The Indonesia Sharia Stock Index (ISSI) is one of the Sharia-based stock indexes officially registered on IDX. This study aims to determine whether there an influence between inflation variable, rupiah exchange rate, and domestic interest rate Index. population used in this data all stocks included calculation Inflation data, for 2016-2019 period. secondary form monthly per year from ...

The optimal inflation tax is reexamined in the framework of dynamic second best economy populated by individuals with inflation aversion. A simple formula for the optimal inflation rate is derived. Different from the literature, it is shown that if the marginal excess burden of other distorting taxes approaches zero, Friedman’s rule for optimum quantity of money is not optimal, and the optimal ...