Remarks by Charles L. Evans, President and Chief Executive Officer,Federal Reserve Bank of Chicago Czech National Bank Prague, Czech Republic

"Why is inflation persistently high in some periods and low in others? The reason may be absence of commitment in monetary policy. In a standard model, absence of commitment leads to multiple equilibria, or expectation traps, even without trigger strategies. In these traps, expectations of high...

"We study how competition from privately supplied currency substitutes affects monetary equilibria. Whenever currency is inefficiently provided, inside money competition plays a disciplinary role by providing an upper bound on equilibrium inflation rates. Furthermore, if Furthermore, if 'inside...