Note 1-11

11 Following theories explain the fact that under the conditions of low inflation, nominal rigidities of product prices and wages become stronger and inflation rates respond weakly to the movement of the economy. 1） Since price changes involve "menu costs," prices should not be revised frequently under the conditions of low inflation (Ball et al., 1988); 2） Reductions in nominal wages should be avoided as they result in deterioration of workers' morals (Akerlof et al., 1996); and 3） The costs of not conducting rational price and wage adjustments are lower when the inflation rate is below a certain level (Akerlof et al., 2000).