Optimal disinflation under learning

Timothy Cogley (), Christian Matthes and Argia Sbordone

No 524, Staff Reports from Federal Reserve Bank of New York

Abstract: Highly volatile transition dynamics can emerge when a central bank disinflates while operating without full transparency. In our model, a central bank commits to a Taylor rule whose form is known but whose coefficients are not. Private agents learn about policy parameters via Bayesian updating. Under McCallum?s (1999) timing protocol, temporarily explosive dynamics can arise, making the transition highly volatile. Locally unstable dynamics emerge when there is substantial disagreement between actual and perceived feedback parameters. The central bank can achieve low average inflation, but its ability to adjust reaction coefficients is more limited.

Keywords: inflation; monetary policy; learning; policy reforms; transitions (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: For a published version of this report, see Timothy Cogley, Christian Matthes, and Argia M. Sbordone, "Optimal Disinflation under Learning," Review of Economic Studies 82, no. 2 (April 2015): 791-824.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr524.html Full text (text/html)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr524.pdf Appendix(es) (application/pdf)
https://www.newyorkfed.org/medialibrary/media/rese ... s/sr524_appendix.pdf (application/pdf)

Related works:
Working Paper: Optimal Disinflation Under Learning (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:524

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().