Expectation paradox, monetary (paradox of monetary confidence)

If a central bank credibly commits itself to price stability, this demonstrably leads to a lower actual inflation rate. This is because economic agents do not prefer (credit-financed) purchases because of higher inflation expectations. Also, wage adjustments fall lower, which continues to lead to lower inflation. – See cost-push inflation, wage-price spiral, open-mouth policy, signaling effect.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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