The total loss in output from cold turkey disinflation
LAC nations, is that the sustainability of disinflation
does not seem to
In early 2003, in addition to maintaining an accommodative monetary policy to support the economic expansion, the FOMC also became concerned with the possible emergence of an unwelcome disinflation
economy going back to World War II and provides economic data on the ten postwar business cycles of recession and recovery, as well as data on periods of war, inflation, and disinflation
in Transition Economics Marek Dabrowski (ed) Central European University Press: Budapest and New York, 2003
Together, these two output costs of fighting inflation play important roles in determining how to seek further disinflation
toward price stability and how best to maintain low inflation.
US Treasury Secretary O'Neill says: "We believe today's actions (to cut the lira loose and overhaul the IMF-backed economic reform plan), coupled with firm and determined implementation of appropriate supportive policies, can be successful in preserving the gains from the program so far and strengthening the foundation for sustained growth and disinflation
This in turn would deprive the country of the stable government needed to push through a bold three-year disinflation
programme launched in January 2000.
But Dr Mervyn King, a deputy governor at the Bank, has insisted in the past that the committee need not bother itself with any inflation or disinflation
arising from changes in the value of the pound, because these are one-off events, not trends.
Consequently, instead of lasting stability, disinflation
only created the conditions for the financial crash of 1998.
In fact, central bank officials must be wary of ``shortfalls in demand and decreases in some prices that would press the disinflation
process too far, too fast,'' said Greenspan, who also chairs the Fed's policy-making Open Market Committee.
But given the disinflation
of recent years and a stable monetary policy recognized by bond market participants, the inflation portion of the overall bond yield risk premium looks minimal and near-full recoupment could prove elusive.