Expectational stability under non-zero trend inflation

Teruyoshi Kobayashi and Ichiro Muto

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the expectational stability of the rational expectation equilibria(REE) under Taylor rules when trend inflation is non-zero. We find that whether or not a higher (lower) trend inflation makes the REE more (less) unstable depends largely on the data (such as contemporaneous data, forecasts and lagged data) used in the conduct of monetary policy.

Keywords: adaptive learning; E-stability; Taylor rule; trend inflation (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Date: 2009-09-03
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mic and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17082

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