Disinflationary shocks and inflation target uncertainty

Stefano Neri and Tiziano Ropele

Economics Letters, 2019, vol. 181, issue C, 77-80

Abstract: In New Keynesian models favourable cost-push shocks lower inflation and increase output. Yet, when the central bank’s inflation target is not perfectly observed these shocks turn contractionary as agents erroneously perceive a temporary reduction in the target. This effect is amplified when monetary policy is constrained by the effective lower bound on the policy rate.

Keywords: Inflation target; Imperfect information; Monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:181:y:2019:i:c:p:77-80

DOI: 10.1016/j.econlet.2019.05.008

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