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Transparency, expectations anchoring and inflation target

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. Transpare...

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Publication status:
Published
Peer review status:
Peer reviewed
Version:
Accepted Manuscript

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Publisher copy:
10.1016/j.euroecorev.2016.11.001

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Department:
Somerville College
Role:
Author
Publisher:
Elsevier Publisher's website
Journal:
European Economic Review Journal website
Volume:
91
Pages:
261–273
Publication date:
2016-11-16
Acceptance date:
2016-11-16
DOI:
EISSN:
1873-572X
ISSN:
0014-2921
Pubs id:
pubs:659708
URN:
uri:57fa4d58-115d-4905-a6bc-2db08553848c
UUID:
uuid:57fa4d58-115d-4905-a6bc-2db08553848c
Local pid:
pubs:659708

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