A Prize Worth Having: The IMF and Price Stability
This essay assesses the benefits of a low-inflation environment for the world economy. To start, the main costs of inflation are reviewed—namely, how it distorts the calculus of profitability, encouraging short-term projects at the expense of longer-term investment and diminishing the value of relative price signals. Then, the progress that most countries have made in recent years toward achieving low inflation is reviewed. The new low-inflation environment has brought noticeable gains—faster global growth, increased stability, and reduced vulnerability. The role of the IMF in helping foster a low-inflation environment is also discussed, highlighting the Fund’s important support for policy reform efforts in its member countries. To conclude, the essay identifies future challenges for economists and policymakers: locking in the benefits of low inflation, identifying how far policies should go toward lowering inflation further, and expanding the knowledge frontiers on the transition toward adopting inflation targeting.
Year of publication: |
2006-12
|
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Authors: | Krueger, Anne |
Institutions: | Banco Central de Chile |
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