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Positive trend inflation and determinacy in a medium-sized New Keynesian model

Abstract:

This paper studies the challenge that increasing the inflation target poses to equilibrium determinacy in a mediumsized New Keynesian model without indexation fitted to the Great Moderation era. For moderate targets of the inflation rate, such as 2 or 4 percent, the probability of determinacy is near one conditional on the monetary policy rule of the estimated model. However, this probability drops significantly conditional on model-free estimates of the monetary policy rule based on real-tim...

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Publication status:
Published
Peer review status:
Peer reviewed

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Oxford college:
Somerville College
Role:
Author
ORCID:
0000-0002-5037-1964
Publisher:
Association of the International Journal of Central Banking
Journal:
International Journal of Central Banking More from this journal
Volume:
16
Issue:
3
Pages:
51-94
Publication date:
2020-06-01
Acceptance date:
2019-02-18
ISSN:
1815-4654
Language:
English
Keywords:
Pubs id:
pubs:905042
UUID:
uuid:c9a5f6d5-8fbc-4fac-8a08-b3bf369aac24
Local pid:
pubs:905042
Source identifiers:
905042
Deposit date:
2019-06-05

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