Average Inflation Targeting: Time Inconsistency and Ambiguous Communication

Chengcheng Jia and Jing Cynthia Wu

No 29673, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the implications of average inflation targeting (AIT). AIT improves the inflation-output trade-off when the private sector believes the central bank’s announcement. Ex post, the central bank has the incentive to implement inflation targeting instead to maximize social welfare. Next, we examine whether and how the central bank can convince the private sector, and find ambiguous communication helps the central bank gain credibility and improve welfare. These results apply to several key aspects of AIT announcement and do not rely on specific modeling assumptions.

JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-mac and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (1)

Published as Chengcheng Jia & Jing Cynthia Wu, 2023. "Average Inflation Targeting: Time Inconsistency and Ambiguous Communication," Journal of Monetary Economics, .

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Journal Article: Average inflation targeting: Time inconsistency and ambiguous communication (2023)
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