Defending Zero Inflation: All for Naught

Deflating the Case for Zero Inflation

This paper analyzes the U.S. congressional proposal to instruct the Federal Reserve to, in the next five years, lower inflation to zero from its current rate of around 5 percent. The paper concludes that, when other policy options are considered, the zero inflation policy is not advisable. Its benefits would be very small—possibly negative—while its costs would probably be significant. Other, m...

Likelihood Analysis of Zero Inflation

We consider a random count variable Y with pmf πy = πy(θ). Typically, interest lies in inference on parameters β defining θi = θ(xiβ) given observations {(yi, xi); i = 1, . . . n}. However, Y is latent, or imperfectly observed; it thus provides an imperfect source of inference on β. We refer to observations yi as realisations of an observable random variable Ỹ and denote its pmf by π̃y = πy(κ, θ...

One for all – The ECB’s Inflation Target

Letter from Zambia 'Naught for your comfort'.

From the privileged position of the academic, removed from the harsher realities of clinical medicine, it is difficult fully to appreciate the health problems of Zambia. The elderly white person, like me-for life expectancy for men is under 50-can still 'enjoy' a somewhat colonial lifestyle with servants, clubs and High Commission. The poor of Lusaka are kept at bay by barbed wire, 24 hour secu...

Commentary: Monetary Policy at Zero Inflation

It is always a pleasure to read one of Lars Svensson’s papers on monetary policy. They are carefully reasoned, substantive, and address real world problems of monetary control. As the bibliography to his paper shows, he has done an impressive amount of theoretical and empirical work on the many facets of inflation control. The paper today summarizes a considerable part of his work. I recommend ...