TREND INFL TREND INFLATION IN MODERA TION IN MODERATE AND L TE AND LOW INFL OW INFLATION PERIODS: THE IMPLICA PERIODS: THE IMPLICATION OF TH TION OF THAI MONE AI MONETARY POLICY

Nipit Wongpunya ()
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Nipit Wongpunya: Chulalongkorn University, Thailand

Bulletin of Monetary Economics and Banking, 2023, vol. 26, issue 3, 445-468

Abstract: This paper examines the effects of trend inflation on managing of monetary policy during moderate and low inflation environments in Thailand. It extends the New Keynesian model by introducing a positive trend inflation. It finds that the response of inflation and output are lower during the moderate inflation period. A high level of trend inflation enlarges the welfare loss. When the target level for inflation is higher, lower weight on output fluctuation is the optimal policy. To adjust the inflation targeting rate, the central bank should consider the response of inflation and output gap to preserve the determinacy.

Keywords: Trend inflation; Monetary policy; Price dispersion; Welfare; Determinacy (search for similar items in EconPapers)
JEL-codes: C32 E52 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:26:y:2023:i:3c:p:445-468

DOI: 10.59091/2460-9196.1797

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