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Inflation-Target Expectations and Optimal Monetary Policy.

Abstract:

In countries with credible ination targeting, it seems plausible to suggest that instead of forming a rational expectation, some rms ("ination-targeters") might simply expect future ination to always equal its target. This paper analyses the implications of this for optimal monetary policy in a standard new-Keynesian model. Under discretion, we show that if shocks have any persistence, ination is more stable, loss is reduced, and the optimal policy frontier is improved as the proportion of in...

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Publisher:
Department of Economics (University of Oxford)
Series:
Discussion paper series
Publication date:
2005-01-01
Language:
English
UUID:
uuid:c74e85ae-0394-46b5-b8f3-a650073a1674
Local pid:
ora:1266
Deposit date:
2011-08-16

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