stable rates of inflation in many countries. Consequently, the main goal of this Paper is to offer an overview of the main … policy issues arising in a low inflation environment and their practical relevance so as to identify the main challenges … nominal wage or price rigidities? What does the low inflation environment imply about the relative importance and effects of …

It is often argued that the EMS is an effective disciplinary device for inflation-prone countries in the EEC, since it … this question appropriately, one must consider that EMS membership brings potentially large credibility gains to policy …-makers in high-inflation countries: the reason is that not only it attaches an extra penalty to inflation (in terms of …

expectations is time-inconsistent. This, it is argued, undermines the credibility of the optimal policy in the eyes of the private … inconsistency problem. They assume that policy-makers suffer a loss of reputation if they renege on earlier commitments. With this …

variables, output and inflation. The contract does not solve the time-inconsistency problem, however. There will be … credibility as a commitment device. But the contract’s strength is that renegotiation can be very visible and this facilitates a …

inflation and the difficulties of East European central banks in pursuing non-inflationary policies. The main obstacles are the … low credibility of stabilization policies and a strategy problem, which is related to the high instability of real and …

inflation. The labour market is characterized by the degree of centralization of bargaining and by the degree of trade unions …’ inflation aversion. The latter leads each union to moderate its wage demands in order to induce the Central Bank (CB) to inflate …) triggers two opposite effects on real wages, unemployment and inflation. The decrease in the number of unions reduces the …

monetary union. There is an incentive to use a surprise inflation tax to wipe out the real value of government debt and wage … monetary union with a non-cooperative or cooperative central bank. This case is stronger when the aversion to inflation is high … is little indexation. Even if all contracts are indexed, there is an incentive to create unanticipated inflation if money …

It is argued that trigger mechanisms cannot support reputation if voters are atomistic and have access to good … difference of policies and outcomes for each party over an electoral period. Under discretion inflation is 10-30 per cent higher … than under precommitment and unemployment is temporarily and modestly lower; under precommitment inflation is negligible …

stages of the Delors process will produce a central bank with little or no anti-inflation credibility. Here we make starkest … Deutschmark, or a European central bank with full monetary union (EMU). Under hard-EMS, an anti-inflationary reputation is … acquired by all as a result of Bundesbank credibility. As regards EMU, it is possible that too rapid a move through the latter …

government to maintain a socially efficient policy of zero inflation for most of the game, without any formal precommitment … supports the results of Backus and Driffill and of Barro, in that the uncertainty induces low or zero inflation outcomes in the …