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A quantitative exploration of the opportunistic approach to disinflation

Yunus Aksoy (), Athanasios Orphanides (), David Small and Volker Wieland ()

No 2005/19, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under 'the opportunistic approach to disinflation' a central bank controls inflation aggressively when inflation is far from its target, but concentrates more on output stabilization when inflation is close to its target, allowing supply shocks and unforeseen fluctuations in aggregate demand to move inflation within a certain band. We use stochastic simulations of a smallscale rational expectations model to contrast the behavior of output and inflation under opportunistic and linear rules.

Keywords: Inflation targeting; monetary policy; interest rates; policy rules; disinflation (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 E61 (search for similar items in EconPapers)
Date: 2005
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Related works:
Journal Article: A quantitative exploration of the opportunistic approach to disinflation (2006) Downloads
Working Paper: A Quantitative Exploration of the Opportunistic Approach to Disinflation (2003) Downloads
Working Paper: A quantitative exploration of the opportunistic approach to disinflation (1997) Downloads
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