ByWolfgang Franz Hans-Werner Sinn
Pages 6

Olivier Blanchard raises the question of whether and under which conditions it is optimal if central banks stabilize inflation rates. He makes the point that such a strategy is to be recommended in an ‘ideal’ world. However, in the real world with many distortions he suggests using flexible inflation targeting. One of the distortions he underlines results from the labour markets and real wage rigidities.