Dampened expectations in the Phillips Curve: A note

Charles Dennery

Economics Letters, 2019, vol. 184, issue C

Abstract: Dampened inflation expectations have a significant impact on the New Keynesian Phillips Curve. This dampening not only flattens the long run Phillips Curve, but it can also lead to a bias in the estimation of its short run slope. It also affects the response of a small NK model to demand shocks, and affects the optimal monetary policy: in particular, the price targeting result of the Ramsey policy is violated when there is dampening.

Keywords: Anchored expectations; Phillips Curve; Ramsey policy (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:184:y:2019:i:c:s0165176519303167

DOI: 10.1016/j.econlet.2019.108642

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