the traditional results on the impact of inflation. In particular, recent findings suggest that quantity-adjustment costs … may remove the linkage between output and inflation. We show that this is not the case when inflation is anticipated. On …

With fixed costs of price and quantity adjustment, output effects of inflation depend on the elasticity of the firm …'s marginal real revenue. If the elasticity always exceeds minus unity, then output decreases with inflation, while if the … elasticity is always less than minus unity, then output increases with inflation. In the special case that the elasticity always …