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 …

long run Phillips curve recorded -0.75 in Sweden and -0.23 in the United States. While the average inflation rate in the … United States was very close to its targeted level, the average inflation rate in Sweden was 0.6 per- centage points below … its targeted level over the sample period. The deviation of inflation rate from its targeted level in Sweden resulted in …