Disinflationary shocks and inflation target uncertainty

Stefano Neri and Tiziano Ropele

No 1230, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In New Keynesian models favourable cost-push shocks lower inflation and increase output. Yet, when the central bank�s inflation target is not perfectly observed these shocks turn contractionary as agents erroneously perceive a temporary reduction in the target. This effect is amplified when monetary policy is constrained by the effective lower bound on the policy rate.

Keywords: inflation target; imperfect information; monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (6)

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Journal Article: Disinflationary shocks and inflation target uncertainty (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1230_19

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