This paper advances the hypothesis that the transition from there-is-little-central-banks-can-do-to-control-inflation … to inflation targeting occurred because central banks, especially the Federal Reserve, demonstrated that central banks … can control inflation rather than a consequence of marked improvement in the professions understanding of how monetary …

explain the variation across time and countries of inflation patterns. In our model's equilibrium, profit differentials … increasing in inflation. Depending on the distribution of price revision costs, if enough sticky price firms choose to revise … their prices, the monetary authority's benefit from inflation is reduced to the point that the model has a unique, low …