solutions such as the conservative central banker and optimal inflation contracts. Our theoretical model also shows how an … inflation targeting range should be set and how it should respond to changes in the nature of shocks to the economy …

indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier … inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo …

inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic … mechanism design problem seems complex, society can implement the optimal policy simply by legislating an inflation cap that … specifies the highest allowable inflation rate. The more severe the time inconsistency problem, the more tightly the cap …

lax nonmonetary policies that induce the monetary authority to generate high inflation. The free-rider problem can be …

inflationary policy than a high-credibility bank, in the sense that it induces higher inflation, but a less expansionary policy in … the sense that it induces lower inflation and employment than expected. Increased transparency makes the bank's reputation …

This paper investigates the effects of wage indexation on the time-consistent level of inflation. Departing from … previous work on time-consistent policy, we study a structural model of the economy. Indexation reduces the cost of inflation … raise inflation but also to raise welfare: the loss from higher inflation is outweighed by the gain from greater protection …