Disagreement and Monetary Policy

Elisabeth Falck, Mathias Hoffmann () and Patrick Hürtgen

No 655, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: Time-variation in disagreement about inflation expectations is a stylized fact in survey data, but little is known on how disagreement interacts with the efficacy of monetary policy. In times of high disagreement we estimate that a 100 bps increase in the U.S. policy rate leads to a significant short-term increase in inflation and in inflation expectations of up to 1.0 percentage point, whereas in times of low disagreement we find a significant decline of close to 1.0 percentage point. We reconcile these state-dependent effects with a dispersed information New Keynesian model, where we calibrate the level of disagreement to U.S. data.

Date: 2018
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Working Paper: Disagreement and monetary policy (2017)
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