A Horse Race of Monetary Policy Regimes: An Experimental Investigation

Olena Kostyshyna, Luba Petersen and Jing Yang

No 30530, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide a comprehensive assessment of leading monetary policy frameworks away from and at the ELB. Inflation targeting, dual mandate, average inflation targeting under 4- and 10-period horizons, price level targeting, and nominal GDP level targeting are evaluated in a laboratory setting. Contrary to theoretical prediction with full information rational expectations, participants exhibit backward-looking expectations and, consequently, rate-targeting mandates outperform level targeting. More history dependence worsens macroeconomic stability. Inflation expectations are managed better when mandates are framed in terms of inflation rates than price levels. Central bank communication significantly improves the performance of price level targeting.

JEL-codes: C92 E52 E70 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-ban, nep-exp and nep-mon
Note: ME
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Citations: View citations in EconPapers (5)

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Working Paper: A Horse Race of Monetary Policy Regimes: An Experimental Investigation (2022)
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