Journal article
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-time data. The difference is driven by the larger response of the federal funds rate to the output gap associated with the latter estimates.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Preview, Accepted manuscript, pdf, 721.8KB, Terms of use)
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Authors
- 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:
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1815-4654
- Language:
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English
- Keywords:
- Pubs id:
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pubs:905042
- UUID:
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uuid:c9a5f6d5-8fbc-4fac-8a08-b3bf369aac24
- Local pid:
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pubs:905042
- Source identifiers:
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905042
- Deposit date:
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2019-06-05
- ARK identifier:
Terms of use
- Copyright holder:
- Association of the International Journal of Central Banking
- Copyright date:
- 2020
- Rights statement:
- Copyright © 2020 by the Association of the International Journal of Central Banking
- Notes:
- This is the accepted manuscript version of the article. The final version is available online from Association of the International Journal of Central Banking at https://www.ijcb.org/journal/ijcb20q2a2.htm
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