CAN THE U.S. MONETARY POLICY FALL (AGAIN) IN AN EXPECTATION TRAP?

Roc Armenter () and Martin Bodenstein

Macroeconomic Dynamics, 2008, vol. 12, issue 05, pages 664-693

Abstract: We propose a model to study monetary policy under discretion. We focus on Markov perfect equilibria, ruling out trigger strategies. The model is simple enough that the determinants of monetary policy under discretion are clear. We also find that for all parameterizations with an equilibrium inflation rate around 2%, there is a second equilibrium with an inflation rate just above 10%. Thus the model can simultaneously account for the low- and high-inflation episodes in the U.S. experience.

Date: 2008

Downloads: (external link)
http://journals.cambridge.org/abstract_S1365100508070387 link to article abstract page (text/html)

Related works:
Working Paper: Can the U.S. monetary policy fall (again) in an expectation trap? (2006)
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: http://EconPapers.repec.org/RePEc:cup:macdyn:v:12:y:2008:i:05:p:664-693_07

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press
Address: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Series data maintained by Mike Eden ().