Macroeconomic data suggest that the New Keynesian Phillips curve is quite flat - despite microeconomic evidence implying frequent price adjustments. While real rigidities may help to account for the conflicting evidence, we propose an alternative explanation: if price markup/cost-push shocks are...

This essay asks how high inflation arises and why it is costly to eliminate. Specifically, the paper discusses the roles of price rigidity and credibility problems in explaining the costs of disinflation; the puzzle of persistent inflation triggered by onetime macroeconomic shocks; and the case...

This paper reviews analytical work carried out by central banks that participated in the Autumn Meeting of Central Bank Economists on "The evolving inflation process" which the BIS hosted on 28-29 October 2005. The paper first discusses efforts to document the univariate statistical properties...

The fiscal theory of the price level (FTPL) has attracted much attention but disagreement remains concerning its defining characteristics. Some writers have emphasized implications regarding interest-rate pegging and determinacy of RE solutions, whereas others have stressed its capacity to...

The fiscal theory of the price level (FTPL) has attracted much attention but disagreement remains concerning its defining characteristics. Some writers have emphasized implications regarding interest-rate pegging and determinacy of RE solutions, whereas others have stressed its capacity to...

This paper reviews Zaiuml;re`s experience with hyperinflation during 1990-96 and develops an illustrative model based on a money demand function that includes government revenue as a determinant. Government revenue is itself subject to the quot;Tanzi effect,quot; in which inflation tends to...