The monetary policy response to uncertain inflation persistence
Economics Letters, 2019, vol. 175, issue C, 5-8
We consider the implications of uncertainty regarding the persistence of inflation for the conduct of monetary policy in the context of a stylized New Keynesian model under the governance of a Taylor-type rule. Both Bayesian and robust (or ambiguity-averse) approaches are employed. The result one might have expected based on the seminal paper of Brainard (1967) which implies attenuation in policy responses, does not hold for the case of uncertain inflation persistence in either the Bayesian or robust cases.
Keywords: Monetary policy; Uncertainty; Inflation persistence (search for similar items in EconPapers)
JEL-codes: E4 E6 C11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:175:y:2019:i:c:p:5-8
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