Great Moderation and Inflation Targeting in the World<sup>1</sup>

Hanaa Kheir-El-Din

in What Drives Prices in Egypt?

Published by American University in Cairo Press

Published in print November 2009 | ISBN: 9789774163036
Published online September 2011 | e-ISBN: 9781617970344 | DOI:
Great Moderation and Inflation Targeting in the World1

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Inflation levels and volatilities have declined and output growth rates are more stable in all major world regions. Economic growth has been nothing but vigorous in the past decade. Price stability is widely recognized in the literature as a welfare enhancing condition that fosters economic growth, facilitates financial deepening, and supports more equal distribution. Globalization — larger financial and trade integration — is behind countries' increased cyclical co-movements. Chronic inflation has been almost wiped out, while world and regional inflation levels have become very stable around low average levels. If consensus among the main political parties is attained, sustainable institutions that provide a general framework for macroeconomic stability are more likely to be adopted, maintained, and refined over time.

Keywords: inflation; economic growth; globalization; price stability; macroeconomic stability

Chapter.  6727 words.  Illustrated.

Subjects: Political Economy

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