A POLICY-GAME APPROACH TO THE HIGH INFLATION EQUILIBRIUM

• 成果类型: Note
• 署名作者: KIGUEL, MA; LIVIATAN, N
• 署名单位: Hebrew University of Jerusalem
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/0304-3878(94)90063-9
• 发表日期: 1994
• 页码: 135-140
• 关键词: HIGH-INFLATION EQUILIBRIUM; POLICY GAME APPROACH

摘要

The high inflation equilibrium (HIE) refers to a steady state solution where inflation is higher than the one which maximizes seigniorage (i.e. inflation is on the falling segment of the Laffer curve). It has been claimed that the HIE can be stable when the adjustment of expectation is fast. However, adjustment is fast because inflation is high; so the argument is circular. In this paper we rationalize the HIE using the policy game approach which distinguishes between discretionary and precommitment regimes. We expand, and demonstrate rigorously (using a technique developed by Obstfeld), Barro's suggestion that a HIE may result from a discretionary regime. We show that this is not possible under precommitment. In addition, we demonstrate that a HIE may result from non-fiscal factors (such as the motivation to reduce unemployment) in a discretionary regime. We conclude with a simple diagrammatic exposition of the difference between our approach and the previous one.