Monetary policy should be aggressive -result of the flattening phillips curve-

Kazuto Masuda ()
Additional contact information
Kazuto Masuda: Bank of Japan

Economics Bulletin, 2008, vol. 28, issue 12, A0

Abstract: As International Monetary Fund(2006) suggested, the inflation rate is less sensitive to business cycles in 1990s than before 1990s in the world. The so called "flattening Phillips curve" becomes the global phenomenon. If this phenomenon is dominant in the world, how does it affect the monetary policy? This is our motivation. In this paper, we use the typical backward looking New Keynesian model based on Orphanides(2003), and derive the optimal monetary policy rule (Taylor rule). Then, we study the effect of the sensitivity of inflation to business cycles on this Taylor rule. We get the result that the flattening Phillips curve supports the aggressive behavior of monetary authority despite the degree of how the nation respects the inflation. If globalization is the main cause of the flattening Phillips curve as IMF pointed out, our conclusion suggests that the globalization should induce the aggressive monetary policy in the world.

JEL-codes: E1 E5 (search for similar items in EconPapers)
Date: 2008-08-06
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2008/Volume28/EB-08AA0019A.pdf (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-08aa0019

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().