Arbeitspapier
Precautionary saving and un-anchored expectations
This paper investigates monetary policy in a heterogeneous agent new Keynesian (HANK) model where agents face idiosyncratic income risk and use adaptive learning in order to form their expectations. Households experience different histories and observe different idiosyncratic variables. This gives rise to idiosyncratic learning processes, which naturally implies the existence of heterogeneous expectations. In HANK models, supply shocks generate precautionary saving. The learning setup amplifies this effect and can result in long-lasting disinflationary traps. Dovish Taylor rules focused on closing the output gap dampen the learning effects. Price level targeting improves the inflation and output stabilization trade-off by better anchoring expectations.
- Sprache
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Englisch
- Erschienen in
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Series: ECON WPS - Working Papers in Economic Theory and Policy ; No. 08/2021
- Klassifikation
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Wirtschaft
Aggregate Factor Income Distribution
Price Level; Inflation; Deflation
Monetary Policy
Macro-Based Behavioral Economics: General‡
- Thema
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adaptive learning
precautionary saving
restricted perception equilibrium
heterogeneous expectations
heterogeneous agent
- Ereignis
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Geistige Schöpfung
- (wer)
-
Grimaud, Alex
- Ereignis
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Veröffentlichung
- (wer)
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TU Wien, Institute of Statistics and Mathematical Methods in Economics, Research Unit in Economics
- (wo)
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Vienna
- (wann)
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2021
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:45 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Grimaud, Alex
- TU Wien, Institute of Statistics and Mathematical Methods in Economics, Research Unit in Economics
Entstanden
- 2021