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Gian Maria MilesiFerretti
The Competence Uncertainty Case
Public Spending and Disinflationary Plans
2 other sections not shown
A.MANNING Alberto Alesina Alesina anti-inflationary program assume assumption behaviour benefits choose to disinflate cold turkey competence parameter competence shock competent government costs of disinflation costs of inflation create surprise inflation D.METCALF decides to disinflate devoting resources disinflationary plan disinflationary program Dornbusch and Fischer Economic Performance election result electoral example expected competence expected loss expected utility facing an election fixed cost government decides government discounts government is able government will choose high inflation countries horizon incentive incompetent incumbent incumbent's re-election inflation is relatively inflation Jt initial inflation lagged indexation lagged wage indexation loses the election loss function lower inflation today Milesi-Ferretti minimisation problem monetary policy money growth once inflation optimal policy output costs preferences private agents quadratic quadratic form rate of inflation reducing inflation reducing the costs seigniorage revenue self-fulfilling serial correlation simple model slowdown social outcomes stabilisation plans started a disinflationary two-period uncertainty utility function variance vote-buying voters voting