of monetary policy. We use a stylized macro model of Howitt (1992) to investigate inflation dynamics under alternative … interest rate in response to inflation. In particular, if the monetary authority only responds weakly to inflation, a … cumulative process with rising inflation is likely. On the other hand, a Taylor interest rate rule that sets the interest rate …

inflation volatility. Contrary to comparable models based on full rationality, the behavioral model predicts that inflation … volatility can be lowered if the central bank reacts to the output gap in addition to inflation. We test the opposing theoretical … reacting to the output gap in addition to inflation can indeed lower inflation volatility. …

detect biases in empirically relevant settings. We illustrate the methodology using data on inflation forecasts. Our …

experiment - where expectations are elicited from human subjects - to collect data on expectations, inflation and output dynamics … under a traditional inflation targeting (IT) framework and a PLT regime with both deflationary and cost-push shocks. We then … implications of PLT, which results in excess macroeconomic volatility. However, once augmented with an inflation guidance from the …