Arbeitspapier
Monetary policy and inflationary shocks under imperfect credibility
This paper quantifies the deterioration of achievable tabilization outcomes when monetary policy operates under imperfect credibility and weak anchoring of long-term expectations. Within a medium-scale DSGE model, we introduce through a simple signal extraction problem, an imperfect knowledge configuration where rice and wage setters wrongly doubt about the determination of the central bank to leave unchanged its long-term inflation objective in the face of inflationary shocks. The magnitude of private sector learning has been calibrated to match the volatility of US inflation expectations at long horizons. Given such illustrative calibrations, we find that the costs of aintaining a given inflation volatility under weak credibility could amount to 0.25 pp of output gap standard deviation.
- Language
-
Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 1065
- Classification
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Wirtschaft
- Subject
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Imperfect credibility
monetary policy
Signal extraction
Geldpolitik
Glaubwürdigkeit
Inflationssteuerung
Inflationserwartung
Dynamisches Gleichgewicht
USA
- Event
-
Geistige Schöpfung
- (who)
-
Darracq Pariès, Matthieu
Moyen, Stéphane
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
-
2009
- Handle
- Last update
-
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
- Darracq Pariès, Matthieu
- Moyen, Stéphane
- European Central Bank (ECB)
Time of origin
- 2009
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