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The Disinflation Issue

Harmen Lehment1. Economic Conference

The Disinflation Issue

Harmen Lehment


Progress has been made in the recent years towards a better understanding of the costs and effects of inflation. There is widespread consensus today on the absence of a long-term trade-off between inflation and unemployment, on the negative effects of inflation on capital formation and economic growth under nominal-based tax systems and on the negative effect of the level of inflation on output stability. Still controversial positions on the disinflation issue persist which cover the timing and the final stage of the disinflation process as well as the choice of supplementary measures to reduce transitory output and employment losses. It is suggested that further empirical research on the effects of monetary policy announcements on wage formation would make an important contribution towards greater consensus on the disinflation issue.


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