In several recent papers macroeconomic policy has been modelled in the context of a game of incomplete information. A central result of the work by Backus and Driffill and by Barro is that the uncertainty may provide an incentive for the government to maintain a socially efficient policy of zero...

We review theoretical and empirical analyses of the costs of inflation. Part 2 of the paper examines microeconomic models in which inflation is perfectly anticipated, and viewed as the only distortion in the economy or as one of many distortionary taxes, which may or may not be chosen optimally....

The view that there are many costs associated with inflation, and especially with high and variable rates of inflation, is widely held. Indeed, the governments in many Western economies have in recent years have adopted the lowering of the rate of inflation as a major objective of economic...