Role of monetary policy in a New Keynesian economy: a note from a laboratory experiment

Abhishek Das, Arpita Ghose and Gautam Gupta ()

Macroeconomics and Finance in Emerging Market Economies, 2016, vol. 9, issue 2, 204-216

Abstract: This paper discusses an experimental study on the role of monetary policy within a New Keynesian macroeconomic framework. The novelty of this article is that each subject was asked to forecast both the inflation rate and output gap at the same time one period ahead, which is an improvement over the existing literature. We find that if both the expected inflation rate and expected output gap is incorporated in the monetary policy rule then inflation can be anchored and stabilized more efficiently.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:taf:macfem:v:9:y:2016:i:2:p:204-216

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DOI: 10.1080/17520843.2015.1103767

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