high, but the costs involved in securing the target are certainly not worth it. Observations and ConclusionsInflation, both high and low, clearly poses great problems on the macro and micro economy. In higher doses, inflation erodes people’s savings, endangers economic growth and propagates social instability. So, it has been argued, “why not in these more disciplined times try to eradicate the disease altogether, just as the world has gotten rid of smallpox? Why not, some central bankers and economists are asking, aim for zero inflation - at least in the industrial countries?” Only in recent years has this question even been feasible. Previously, if inflation was single digit, it was quite acceptable. “Now, however, the world is entering an era of low inflation that brings more ambitious targets within reach. According to the International Monetary Fund, average inflation in the industrial countries is running at only just over 2 percent a year, and although the rate is much higher in the developing countries, it is falling quickly.” As shown in this study, the proliferation of low inflation monetary policies to pursue virtual price stability is at the root of this phenomenon. However, as shown in this paper, zero inflation objectives are not wise: Central banks and governments may be trying to kill something that is not capable of being made extinct. This is particularly true in the era of globalisation. “Fiercer global competition and freer world trade, low oil and commodity prices, the declining power of labour unions, the growing resistance of consumers to price increases, and the heavy penalties imposed by financial markets on undisciplined governments” are working to complicate monetary policies, and further make zero inflation impractical. Thus, even if ‘zero’ or low inflation is readily achievable, as it seems to be, it does so in the face of very powerful variabl...
