Monetary Policy in a Low Inflation Environment: Is There Evidence for Opportunistic Behaviour?

Naveen Srinivasan, M Ramachandran () and Sudhanshu Kumar ()

Journal of Quantitative Economics, 2010, vol. 8, issue 2, 4-19

Abstract: The Opportunistic Approach to disinflation is an influential model of optimal monetary policy. This strategy for disinflation suggests that in a low inflation environment policymakers' would give higher weight to inflation stabilization when inflation is strengthening, but higher weight to stabilizing output when the economy is already producing lower inflation via favourable supply shocks. A time-varying parameter (TVP) model is estimated to evaluate its empirical likelihood using US data. Preliminary results support this model during the Greenspan regime.

Date: 2010
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