This paper reviews the key economic issues concerning the welfare costs of inflation and deflation, with a view to … shedding light on the desirable properties of the inflation process. Our review of the evidence on the overall costs of … inflation and deflation indicates that such costs could be even higher than previously thought, also at moderate rates of …

the determination of inflation and output in the euro area and the existence of a non-vertical long-run Phillips curve …

help anchoring inflation expectations. We use survey data on long-term inflation expectations in 15 industrial countries … since the early nineties to investigate how well anchored are inflation expectations. We find that in all countries except … Japan long-term inflation expectations are well anchored and, generally, increasingly so over the past decade. When …

such as the shortterm nominal interest rate, annual inflation and output. …

target inflation rates as low as 2 percent. However, the effects of the constraint are non-linear with respect to the inflation … percent. The variability of output increases significantly and that of inflation also rises somewhat. Also, we show that the … increasingly short of potential with lower inflation targets. …

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 …