Public sector price increases, credibility and welfare

• 成果类型: Article
• 署名作者: Buffie, EF
• 署名单位: Indiana University System; Indiana University Bloomington
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(97)00068-8
• 发表日期: 1998
• 页码: 127-151
• 关键词: public sector prices; credibility; inflation; unemployment

摘要

This paper examines the dynamics of inflation and unemployment when the government increases public sector prices and wage indexation prevents the labor market from clearing in the short run. Credible reforms are virtually certain to be immediately deflationary and welfare improving even when the labor market clears very slowly. Temporary price increases, however, usually produce higher inflation after a short period of time and often reduce welfare. When higher inflation provokes the government to reverse the reform, there exist multiple self-fulfilling equilibria. (C) 1998 Elsevier Science B.V. All rights reserved.