Monetary policy frameworks away from the ELB
Fiorella De Fiore,
Benoit Mojon,
Daniel Rees and
Damiano Sandri
No 19299, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
We evaluate the performance of alternative monetary policy rules during and after the post-pandemic inflation surge. We first document that inflation expectations remained well anchored in advanced economies irrespective of differences in monetary policy frameworks. We then show that an aggressive inflation targeting (IT) rule would have contained the inflation surge very modestly relative to a benchmark average inflation targeting (AIT) rule, at the cost of larger negative output gaps. Finally, looking at the post inflation surge period, we compare monetary policy frameworks with respect to potential changes in the distribution of the shocks hitting the economy, the slope of the Phillips curve, and the level of r*. We illustrate that the benefits of a dual mandate relative to a single mandate increase under a AIT rule and when the Phillips curve is flatter; that AIT rules tend to stabilize inflation and interest rates relative to IT rules but can generate higher output volatility; and that AIT is more robust than IT to a possible misperception of r*.
JEL-codes: E31 E42 E52 E58 (search for similar items in EconPapers)
Date: 2024-07
References: Add references at CitEc
Citations:
Downloads: (external link)
https://cepr.org/publications/DP19299 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Working Paper: Monetary policy frameworks away from the ELB (2023) 
Working Paper: Monetary Policy Frameworks Away from the ELB (2023) 
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:cpr:ceprdp:19299
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19299
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().