Inflation control: Do central bankers have it right?

Abstract

Neo-Fisherites argue that conventional central banking wisdom has inflation control wrong, in that the way to increase (reduce) inflation is to increase (reduce) the central bank’s nominal interest rate target. This article shows how two conventional macroeconomic monetary models—a New Keynesian (NK) model and a segmented markets model—exhibit neo-Fisherian properties. Thus, neo-Fisherism should actually be the foundation for conventional inflation control.