Arbeitspapier
Expectations and monetary policy: Experimental evidence
The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business-cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and the output gap by at least two-thirds. These stabilization benefits can be substantially smaller if expectations are non-rational. We design an economic experiment that identifies the contribution of expectations to macroeconomic stabilization achieved by systematic monetary policy. We find that, despite some non-rational component in expectations formed by experiment participants, monetary policy is quite potent in providing stabilization, reducing macroeconomic variance by roughly half.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Working Paper ; No. 2013-44
- Klassifikation
-
Wirtschaft
Expectations; Speculations
Monetary Policy
- Thema
-
Business fluctuations and cycles
Monetary policy implementation
Transmission of monetary policy
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Kryvtsov, Oleksiy
Petersen, Luba
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2013
- DOI
-
doi:10.34989/swp-2013-44
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Kryvtsov, Oleksiy
- Petersen, Luba
- Bank of Canada
Entstanden
- 2013
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