which an emerging market central bank that targets inflation might lose control of inflation--in other words of the … literature, from Sargent and Wallace (1981) to the modern fiscal theory of the price level has discussed how an unsustainable … perverse effect on inflation. We show that the presence of default risk reinforces the possibility that a vicious circle might …

standard New-Keynesian model, and may even inflate the equity premium. Second, asset-price movements improve the inflation …-output trade-off so that average output can rise without increasing much average inflation. Finally, a strict inflation …-targeting policy may result in lower average welfare than a more flexible inflation-targeting policy, which instead increases the …

properties of the yield curve when inflation is an exogenous process and compare this to the yield curve when inflation is … endogenous and determined through an interest-rate/Taylor rule. When inflation is exogenous, it is difficult to match the shape … with exogenous inflation does not exhibit any negative autocorrelation - a necessary condition for an upward sloping yield …