Monetary policy & anchored expectations—An endogenous gain learning model

Laura Gáti

Journal of Monetary Economics, 2023, vol. 140, issue S, S37-S47

Abstract: Monetary policy is analyzed in a model with a potential unanchoring of inflation expectations. The degree of unanchoring is given by how sensitively the public’s long-run inflation expectations respond to inflation surprises. I find that optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate inflation fluctuations when expectations are well-anchored. Furthermore, I estimate the model-implied unanchoring process. The data suggest that unanchoring is nonlinear and asymmetric: expectations respond more sensitively to large or downside surprises than to smaller or upside ones.

Keywords: Anchored expectations; Behavioral macro; Monetary policy (search for similar items in EconPapers)
JEL-codes: D84 E52 E71 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S030439322300082X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Monetary policy & anchored expectations: an endogenous gain learning model (2022)
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:eee:moneco:v:140:y:2023:i:s:p:s37-s47

DOI: 10.1016/j.jmoneco.2023.06.009

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().