Arbeitspapier
What to target? Insights from a lab experiment
This paper compares alternative monetary policy regimes within a controlled lab environment, where groups of participants are tasked with repeatedly forecasting inflation in a simple macroeconomic model featuring only the dynamics of interest rates, inflation and inflation expectations. Average-inflation targeting can approximate the price path observed under price-level targeting in the presence of disinflationary shocks and enable subjects to coordinate on simple heuristics that reflect the concern of the central bank for past inflation gaps. However, this depends on the exact specification of the policy rule. In particular, if the central bank considers more than two lags, subjects fail to form expectations that are consistent with the monetary policy rule, which results in greater inflation volatility. Reinforcing communication around the target helps somewhat anchor longrun inflation expectations.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Staff Working Paper ; No. 2021-53
- Classification
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Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy
Design of Experiments: Laboratory, Group Behavior
- Subject
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Monetary policy framework
Inflation targets
Monetary policy communications
- Event
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Geistige Schöpfung
- (who)
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Salle, Isabelle L.
- 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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2021
- DOI
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doi:10.34989/swp-2021-53
- Handle
- Last update
-
10.03.2025, 11:43 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
- Salle, Isabelle L.
- Bank of Canada
Time of origin
- 2021
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