The actuality is that it almost never occurs, so it appears as though we are asymmetric when, indeed, we are not. The markets are asymmetric; we are not”. In the following months stock prices skyrocketed, especially on Nasdaq, the Fed’s policy moved to a tighter stance, and monetary tightening ended up bursting, late, the dot-com bubble in 2000-01.
The evidence actually points the other way: the benefits of price stability are elusive, the costs of getting there are large, and zero inflation may not be a good thing even in the long run.’ The observations of Prof. Krugman as they stand are not directed against price stability as an objective but are aimed against a policy which seeks ‘absolute’ price stability and attempts to bring down the inflation rate from around two per cent to almost zero.