price level. The analysis compares the properties of optimal policy in regimes ranging from pure inflation targeting (IT …), to a form of weighted-average inflation targeting (WAIT), to pure price level targeting (PLT). Strategies such as WAIT …

Building on the results in Nalewaik (FEDS 2015-93), this work models wage growth and core PCE price inflation as regime … price inflation that becomes much larger after labor markets tighten beyond a certain point. The results are informative for … assessing the likelihood and risks of meeting certain inflation targets on a sustained basis …

inflation and deflationary biases in inflation expectations. In a model with an occasionally binding zero-lower-bound constraint …, we show that an inflation bias as well as a deflationary bias exist as a steady-state outcome. We assess the predictions … of this model using unique individual-level inflation expectations data across nine countries that allow for a direct …

We consider what, if any, relationship there is between monetary aggregates and inflation, and whether there is any … paribus unitary relationship between inflation and money growth. Simulations of a New Keynesian model suggest that we should … allowance needed for the phase shift in the relationship between monetary growth rates and inflation. While financial innovation …

Since Kydland and Prescott (1977) and Barro and Gordon (1983), most studies of the problem of the inflation bias …-quadratic approach to the problem in favor of a projection method approach. We investigate the size of the inflation bias that arises in … a microfounded nonlinear environment with Calvo price setting. The inflation bias is found to lie between 1% and 6% for …

This paper studies the welfare consequences of exogenous variations in trend inflation in a New Keynesian economy …. Consumption and leisure respond asymmetrically to a rise and a decline in trend inflation. As a result, an increase in the … variance of shocks to the trend inflation process decreases welfare not only by increasing the volatilities of consumption and …

This paper examines two candidate hypotheses explaining the stabilization of U.S. inflation since the 1970s and 1980s …. The first explanation credits the stabilization of inflation expectations, and assumes those expectations have a strong … positive causal effect on actual subsequent inflation, while the second explanation credits the disappearance of such a strong …

Economists and economic policymakers believe that households' and firms' expectations of future inflation are a key … determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on …

This paper decomposes consumer price inflation into pure inflation, relative price inflation, and idiosyncratic … inflation by estimating a dynamic factor model á la Reis and Watson (2010) on a data set of 146 monthly disaggregated prices … from 1995 to 2019. We find that pure inflation is the trend around which PCE price inflation fluctuates, while relative …

patterns in economic activity and inflation following oil price shocks in the euro area. In the 'normal regime', oil price … shocks are followed by sizeable and sustained macroeconomic fluctuations, with inflation and economic activity moving in the … same direction as the oil price. The responses of inflation expectations and wage growth point to second-round effects as a …