inflation stabilization. Unstable dynamics can occur when the CB is aggressively raising the interest rate in response to higher … expected inflation. The constraint on stabilizing interest rate policy is tighter the higher the primary deficit and the more … policy to be accommodating (passive). Inflation stabilization is nevertheless feasible if the CB uses an instrument not …

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 …

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 …

the presence of sovereign default beliefs a monetary policy, which aims to stabilize inflation through an active interest …

shock, or they exclude contemporaneous values of these variables from the monetary authority's information set. This paper … advantage that it makes the exercise less vulnerable to potential misidentification of the US monetary policy shock. The results …

six-variable system supports time variation in US monetary policy shock identification. In the sample-dominating first … regime, systematic monetary policy follows a Taylor rule extended by the term spread and is effective in curbing inflation … stimulus, features the liquidity effect, and is complemented by a pure term spread shock. Absent the specific monetary policy …