Inflation has been well contained over the last decades in most industrialized countries. This implies, however, that memories of high inflation are likely to fade, because over time larger parts of the population have never experienced high inflation, whereas those who have might forget. This...

This paper examines whether high government debt levels pose a challenge to containing inflation. It does so by assessing the impact of government debt surprises on inflation expectations in advanced- and emerging market economies. It finds that debt surprises raise long-term inflation...

Are preferences exogenously given? Or do individual tastes and values evolve endogenously within a particular socio-economic environment? In this paper, we make use of a natural experiment to analyse the role of inflation experiences and institutions in the formation of individual inflation...

This paper reviews Zaiuml;re`s experience with hyperinflation during 1990-96 and develops an illustrative model based on a money demand function that includes government revenue as a determinant. Government revenue is itself subject to the quot;Tanzi effect,quot; in which inflation tends to...

Recent research in macroeconomics has sought to develop a tractable form of heterogeneity in attempting to model sluggishness of response of the economy consistent with data. Sims (2003) argued that limited information processing was a promising avenue for understanding pervasive stickiness....

The long-run relationship between money and prices in the euro area embedded in traditional money demand models with income and interest rates broke down after 2001. We develop a money demand model where investors hold a diversified portfolio with money, domestic and foreign stocks and long-term...

This paper examines the long-run effects of supply shocks (such as oil shocks) on inflation in the United States. The persistence of supply shocks in U.S. inflation fell considerably during the period of Volcker's disinflation (1979-1982). My empirical results suggest that the difference between...

This paper investigates how inflation expectations evolve. In particular, we analyze the time-varying nature of the propensity to update expectations and its potential determinants. For this purpose we set up a flexible econometric model that tracks the formation of inflation expectations of...

In this paper we systematically evaluate how central banks respond to inflation deviations from target. We present a stylized New Keynesian model in which agents' inflation expectations are sensitive to inflation deviations from target. To (re-)establish credibility, optimal monetary policy...

This paper studies the importance of money for inflation in the euro area. An inflation equation is derived from a small model that combines the supply and demand for money with a Phillips curve and the assumption that inflation expectations develop adaptively. The model's solution attributes an...