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responds to inflation and output volatility, especially during economic crises. This framework offers a promising alternative …
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targets (inflation and output gap) are forward-looking variables in the new-Keynesian theory …
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indicator for future inflation, therefore being only instrumental (to stabilize inflation) rather than important per se. …
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authority-a scenario increasingly relevant for many developed economies today. Central bank control over the long-run inflation …
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Using US data, we estimate optimal policy with a probability below one that the Fed reneges on its commitment ("limited credibility") versus discretionary policy where the Fed reneges on its commitment at all periods with a probability equal to one ("zero credibility"). The transmission...
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