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Price level versus inflation targeting under heterogeneous expectations: a laboratory experiment

Cars Hommes () and Tomasz Makarewicz

Journal of Economic Behavior & Organization, 2021, vol. 182, issue C, 39-82

Abstract: Since the 2007 crisis, macroeconomists have been interested in monetary policies that could help with stabilizing inflation and output (Honkapohja, 2015). Two ideas gained particular attention: (i) that inflation should be replaced by the nominal price level (PLT) as the target for the central bank; and (ii) that the central bank should provide explicit guidance about its interest rate rule. We conduct a laboratory experiment to test the validity of these two hypotheses.

Keywords: Experimental macroeconomics; Expectations and learning; Monetary policy (search for similar items in EconPapers)
JEL-codes: C92 D83 D84 E52 E62 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jebo.2020.11.011

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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