A discussion of six papers presented at the Federal Reserve Bank of Cleveland's Conference on Price Stability in November 1990, focusing on how recent developments in macroeconomic research have changed perceptions about optimal inflation policy.

There is growing evidence that the empirical Phillips curve within the US has changed significantly since the early 1980’s. In particular, inflation persistence has declined sharply. The paper demonstrates that this decline is consistent with a standard Dynamic New Keynesian (DNK) model in...

Low inflation over long periods is the sign of an effective central bank. The authors suggest that a large fraction of the worldwide decline in inflation since the early 1980s results from an international movement toward more independent central banks.

Observations that the Phillips curve may be deviating from historical norms are important to policymakers because deviations would imply that more or less output has to be sacrificed to achieve a permanent reduction in long-term inflation. But we argue that recent economic shocks and a shift in...

Is inflation (in the often-quoted words of Milton Friedman) "always and everywhere a monetary phenomenon"? Some say no, arguing that inflation is controlled not only by the central bank but also by the fiscal authority. This Commentary authors explore their argument, known as the fiscal theory...

This paper demonstrates that in a standard monetary model with a cash-in-advance constraint on consumption there exists real indeterminacy whenever the nominal interest rate moves too closely with the real rate. A particular example of such a policy is an inflation rate target. This is not a...

An examination of a standard sticky-price monetary model whose conditions are perturbed relative to the canonical real-business-cycle model by two varying distortions: marginal cost and the nominal rate of interest. The paper explores the implications of two monetary policies that are frequently...

An examination, using the overlapping-generations approach, of how the interactions between inflation and the nominal taxation of capital income affect the cyclical behavior of the U.S. economy.