LYCOS RETRIEVER 
Inflation: Inflation Risk
built 192 days ago
[One] aspect is the time horizon over which the inflation target is to be achieved. The target horizon should match the length of the lags in the monetary policy transmission mechanism. If the target horizon is too short, the inflation target can easily be missed following shocks. This risks damaging the credibility of the policy framework, and may lead to excessive output volatility. Inflation targets can have annual, multi-year, or indefinite horizons. They can ... be required to be satisfied on average over a business cycle, as for example in Australia.
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[One] argument against zero inflation is the risk of deflation, a drop in the nominal price level, which could be quite costly to the degree that some prices and wages might not easily adjust downward. From the late nineteenth century until World War II, long downward trends in the price level and shorter periods of falling price levels were common in the industrialized world. But they were generally associated with falling output and rising unemployment. Declines in the general price level have been rare in industrialized countries since the end of World War II, although Sweden did sustain a mild deflation in 1996 with few apparent negative consequences.
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In investing, inflation risks often cause investors to take on more systematic risk, in order to gain returns that will stay ahead of expected inflation. Inflation is ... used as an index for cost of living adjustments and as a peg for some bonds. In effect, inflation is the rate at which previous economic transactions are discounted economically.
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By strategically deploying a combination of "authorized user" and "non-authorized user" credit characteristics, TransUnion offers a tailored solution that will notify financial institutions of potential artificial score inflation. The solution is customized according to a lender's specific credit criteria and risk threshold and is available online or in batch delivery.
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Inflation Risk