Arbeitspapier

Trend Inflation, Taylor Principle and Indeterminacy

We show that low trend inflation strongly a¤ects the dynamics of a standard Neo-Keynesian model where monetary policy is described by a standard Taylor rule. Moreover, trend inflation enlarges the indeterminacy region in the parameter space, substantially altering the so-called Taylor principle. The main results hold for di¤erent types of Taylor rules, inertial policy rules and indexation schemes. The key message is that, whatever the set up, the literature on Taylor rules cannot disregard average inflation in both theoretical and empirical analysis.

Sprache
Englisch

Erschienen in
Series: Kiel Working Paper ; No. 1332

Klassifikation
Wirtschaft
Monetary Policy
Price Level; Inflation; Deflation
Thema
Sticky Prices
Taylor Rules and Trend Inflation
Preisrigidität
Inflation
Taylor-Regel
New-Keynesian Phillips Curve
Theorie

Ereignis
Geistige Schöpfung
(wer)
Ascari, Guido
Ropele, Tiziano
Ereignis
Veröffentlichung
(wer)
Kiel Institute for the World Economy (IfW)
(wo)
Kiel
(wann)
2007

Handle
Letzte Aktualisierung
12.07.2024, 13:23 MESZ

Objekttyp

  • Arbeitspapier

Beteiligte

  • Ascari, Guido
  • Ropele, Tiziano
  • Kiel Institute for the World Economy (IfW)

Entstanden

  • 2007

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