Arbeitspapier
Average is good enough: Average-inflation targeting and the ELB
The Great Recession and current pandemic have focused attention on the constraint on nominal interest rates from the effective lower bound. This has renewed interest in monetary policies that embed makeup strategies, such as price-level or average-inflation targeting. This paper examines the properties of average-inflation targeting in a two-agent New Keynesian (TANK) model in which a fraction of firms have adaptive expectations. We examine the optimal degree of history dependence under average-inflation targeting and find it to be relatively short for business cycle shocks of standard magnitude and duration. In this case, we show that the properties of the economy are quantitatively similar to those under a pricelevel target.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Staff Working Paper ; No. 2020-31
- Classification
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Wirtschaft
Price Level; Inflation; Deflation
Business Fluctuations; Cycles
Monetary Policy
- Subject
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Monetary policy framework
Business fluctuations and cycles
Economic models
- Event
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Geistige Schöpfung
- (who)
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Amano, Robert A.
Gnocchi, Stefano
Leduc, Sylvain
Wagner, Joel
- Event
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Veröffentlichung
- (who)
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Bank of Canada
- (where)
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Ottawa
- (when)
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2020
- DOI
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doi:10.34989/swp-2020-31
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Amano, Robert A.
- Gnocchi, Stefano
- Leduc, Sylvain
- Wagner, Joel
- Bank of Canada
Time of origin
- 2020
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