Transparency, Expectations Anchoring and Inflation Target

Alessandro Gobbi, Guido Ascari, Anna Florio

Risultato della ricerca: Contributo in rivistaArticolo in rivista

5 Citazioni (Scopus)

Abstract

In various speeches, former Fed Chairman Ben Bernanke contrasted the proposal of setting a higher inflation target by claiming that it could unanchor inflation expectations. A standard New Keynesian framework with learning supports this claim both asymptotically, because a higher inflation target shrinks the E-stability region when a central bank follows a Taylor rule, and in the transition phase, because a higher inflation target slows down the speed of convergence of expectations. Transparency helps anchoring expectations. However, the importance of being transparent diminishes with the level of the inflation target. Finally, the higher the inflation target, the more policy should respond to inflation and the less to output to guarantee E-stability. Hence, a policy that increases both the inflation target and the monetary policy response to output would be “reckless”.
Lingua originaleEnglish
pagine (da-a)261-273
Numero di pagine13
RivistaEuropean Economic Review
VolumeVolume 91
DOI
Stato di pubblicazionePubblicato - 2017

Keywords

  • Learning
  • Monetary Policy
  • Transparency
  • Trend Inflation

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