By Alex Cukierman
This ebook surveys the imperfect-information method of inflation and its actual results. kinds of informational problem are thought of. One includes occasions within which contributors have uneven information regarding the present normal fee point and for this reason confuse relative and combination adjustments in costs. the opposite considers events during which contributors can't distinguish everlasting from transitory alterations once they take place, making a transitority yet power confusion among such alterations. the writer provides the arguments in the context of the hot re-evaluations by way of economists of formerly proven perspectives relating inflation and its interplay with genuine phenomena.
Read or Download Inflation, Stagflation, Relative Prices, and Imperfect Information PDF
Similar macroeconomics books
Principles of Macroeconomics (5th Edition)
Ideas OF MACROECONOMICS is still the preferred and prevalent textual content in economics school rooms this day. The 5th version incorporates a robust revision of content material in all 36 chapters whereas retaining the transparent, obtainable writing variety and particular presentation which are the hallmark of this hugely revered writer.
Blanchard offers a unified and international view of macroeconomics, permitting scholars to determine the connections among the short-run, medium-run, and long-run.
From the main fiscal quandary to the funds deficits of the us, the designated packing containers during this textual content were up to date to express the lifetime of macroeconomics at the present time and toughen the teachings from the types, making them extra concrete and more straightforward to know.
Confidence, credibility, and macroeconomic policy: past, present, future
Self belief, Credibility and Macroeconomic coverage is split into 3 sections. half I is an outline of the inter-relationship among monetary coverage and credibility and inflation. half II makes a speciality of empirical examine and offers ancient in addition to modern proof at the significance of public self belief and expectancies to the luck of financial and financial coverage.
Additional resources for Inflation, Stagflation, Relative Prices, and Imperfect Information
Sample text
One way to limit the detrimental effects of this mechanism is to deny credit to some of those who apply for it at the interest rate set by the bank. Under such circumstances there is an excess demand for loans even when the bank is in equilibrium. An obvious way to eliminate this disequilibrium would be to raise the interest rate. If the detrimental effects of this increase because of the increase it causes in the probability of default ou'tweigh the direct positive effects of the increase on the bank's objective function, however, it will pay the bank to main tain the interest rate at the lower level and under some circumstances to grant credit to only some of the applicants, thus rationing credit.
As stressed by Hirschleifer and Riley (1979), any activity is a potential signal if the sellers of higher-quality products can engage in it at higher mar ginal returns . Nelson (1974, 1975) offers a similar argument to justify advertising for high-quality goods when repeat purchases are prevalent. By acquiring a pool of satisfied customers, the seller of high-quality goods will achieve lower marginal advertising costs per unit of sales. Even if the information content of the advertising message itself is zero, a message is nevertheless being conveyed: The product is worth promoting.
If such markets did exist, all inside information would immediately have been transmitted to everybody, thus nullifying the incentive to collect costly information. Hence equilibrium in a costly information market requires that there be fewer prices than random events; otherwise there is no incentive to become informed. This notion is discussed more fully in Section 4. To maintain some incentive for becoming informed , Grossman intro duces an additional source of uncertainty in the form of a stochastic (for the uninformed) risk-aversion parameter for informed firms.
