This book's central theme is that a policymaker's role is to enhance the public's ability to coordinate their price information, price expectations, and economic activities. This role is fulfilled when policymakers maintain inflation stability. Inflation persists less when an implicit or explicit inflation target is met. Granato and Wong argue that inflation persistence is reduced when the public substitutes the prespecified inflation target for past inflation. A by-product of this co-ordination process is greater economic stability. In particular, inflation stability contributes to greater economic output stability, including the potential for the simultaneous reduction of both inflation and output variability - inflation-output co-stabilization (IOCS). Granato and Wong use historical, formal, and applied statistical analysis of business-cycle performance in the United States for the 1960 to 2000 period. They find that during periods when policymakers emphasize inflation stability, inflation uncertainty and persistence were reduced.
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(216mm x 138mm x 22mm)
Cambridge University Press
Publisher: Cambridge University Press
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Author Biography - Jim Granato
Jim Granato is a Visiting Scientist and Political Science Program Director at the U.S. National Science Foundation (NSF). He is the author or co-author of numerous publications in academic journals such as American Journal of Political Science, Economics and Politics, Journal of Theoretical Politics, Political Analysis, Political Research Quarterly, and Public Choice. M. C. Sunny Wong is Assistant Professor of Economics at the University of Southern Mississippi. His primary research has focused on adaptive learning dynamics in monetary policy and he is also interested in the areas of foreign direct investment (FDI) and economic growth. Professor Wong has published research articles in journals such as the Southern Economic Journal, Political Reswarch Quarterly, and Journal of Macroeconomics.