This paper investigates the macroeconomic risks associated with undesirably low inflation using a medium-sized New … Keynesian model. We consider different causes of persistently low inflation, including a downward shift in long-run inflation … persistently low inflation depend crucially on its underlying cause, as well as on the extent to which monetary policy is …

In New Keynesian models favourable cost-push shocks lower inflation and increase output. Yet, when the central bank …'s inflation target is not perfectly observed these shocks turn contractionary as agents erroneously perceive a temporary reduction …

that the inflation bias can persist even when the central bank commits. A simple model is presented in which the central … bank precommits by setting the policy instrument, and the subsequent adjustment of inflation expectations is part of the … transmission mechanism. Generally there is still an inflation bias, despite the absence of a time-inconsistency problem. It is …

indicate that supplementing the inflation target with a tolerance interval may be useful to enhance central bank credibility …

, prompting them to raise markups and prices in anticipation of potentially higher future inflation. These findings establish a … connection between heightened uncertainty, higher core inflation, and increased profits. …

relationship between uncertainty of inflation persistence and optimal monetary policy and discusses the consequences of the recent … Blanchard proposal to implement a higher inflation target in the light of parameter uncertainty. Furthermore, it provides …-orthogonal parameter uncertainty. -- inflation persistence ; parameter uncertainty ; inflation target ; dynamic programming …

We analyse the interaction between private agents? uncertainty about inflation target and the central bank's data … uncertainty. In our model, private agents update their perceived inflation target and the central bank estimates unobservable … economic shocks as well as the perceived inflation target. Under those two uncertainties, the learning process of both private …

It is well known that the canonical New Keynesian model cannot produce inflation inertia observed in real data. The … purpose of this research is to investigate expectation formation process as a potential source of inflation inertia. We …-looking behavior of price-setters, but from the expectation formation process of the private agents. In this sense, the inflation …

relationship between uncertainty of inflation persistence and optimal monetary policy and discusses the consequences of the recent … Blanchard proposal to implement a higher inflation target in the light of parameter uncertainty. Furthermore, it provides …