Price stability as a policy objective As I noted at the outset, it is widely agreed that low and stable inflation is desirable. Several costs of high and variable inflation have been identified. These costs typically arise from distortions in economic decisionmaking arising from high or variable inflation rates and result in lower levels of output than would otherwise be the case.
The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them it is hard to think about anything else.”1 Clearly the Indian government seems to have met Lucas’s challenge and so there are surely lessons to be learned from each and every country’s experience.