Implications for determinacy with average inflation targeting

Yamin Ahmad () and James Murray ()
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Yamin Ahmad: University of Wisconsin - Whitewater
James Murray: University of Wisconsin - La Crosse

Economics Bulletin, 2023, vol. 43, issue 1, 510 - 517

Abstract: We use a standard New Keynesian model to explore implications of backward- and forward-looking windows for monetary policy with average inflation targeting and investigate the conditions for determinacy. A unique equilibrium rules out sunspot shocks that can lead to self-fulfilling shocks for inflation expectations. We find limitations for the length of the forward window and demonstrate how this depends on other parameters in the model, including parameters governing monetary policy and expectations formation.

Keywords: Average Inflation Targeting; Indeterminacy; Monetary Policy; Policy Window (search for similar items in EconPapers)
JEL-codes: E5 E6 (search for similar items in EconPapers)
Date: 2023-03-30
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