Jia, Chengcheng; Wu, Jing Cynthia - National Bureau of Economic Research - 2022
We study the implications of the Fed's new policy framework of average inflation targeting (AIT) and its ambiguous … communication. The central bank has the incentive to deviate from its announced AIT and implement inflation targeting ex post to … inflation as a result of time inconsistency. First, it is optimal for the central bank to announce different horizons depending …