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Looking through supply shocks versus controlling inflation expectations : understanding the Central Bank dilemma

Beaudry, Paul; Carter, Thomas J.; Lahiri, Amartya - 2022 - Last updated: September 20, 2022

Central banks in most advanced economies have reacted similarly to the increase in inflation that started in 2021. They initially looked through the rising inflation by leaving monetary policy relatively unchanged. Then, after inflation continued to increase, central banks pivoted by quickly...

Persistent link: https://www.econbiz.de/10013370504

When Does the Cost Channel Pose a Challenge to Inflation Targeting Central Banks?

Smith, Andrew - 2016

In a sticky-price model where firms finance their production inputs, there is both a lower and an upper bound on the central bank's inflation response necessary to rule out the possibility of self-fulfilling inflation expectations. This paper shows that real wage rigidities decrease this upper...

Persistent link: https://www.econbiz.de/10013004074

The Bank of Canada's "horse race" of alternative monetary policy frameworks: some interim results from model simulations

Dorich, José; Mendes, Rhys; Zhang, Yang - 2021

Since 1991, the Bank of Canada has had an inflation‐targeting (IT) framework established by a joint agreement between the Bank and the Government of Canada. The framework is reviewed every five years as part of the process for renewing the inflation‐control agreement. This discussion paper...

Persistent link: https://www.econbiz.de/10012613645

Do Inflation-Targeting Central Banks Implicitly Target the Price Level?

Ruge-Murcia, Francisco J. - 2010

This paper reports graphical and statistical evidence that the inflation targeting regimes in Canada and the UK - but not in Australia, New Zealand, or Sweden - actually resemble price-level targeting. In particular, the price level closely tracks the path implied by the inflation target, and...

Persistent link: https://www.econbiz.de/10013148191

Central Bank Credibility and Monetary Policy

Park, Kwangyong - 2018

A numerical measure of central bank credibility, which can be incorporated into a New Keynesian model under bounded rationality, is proposed and analyzed. This measure arises mainly due to the existence of the drifts in private long-term predictions, which are different from those of the central...

Persistent link: https://www.econbiz.de/10012906326

A new measure of monetary policy shocks

Zhang, Xu - 2021 - Last updated: June 21, 2021

Federal Reserve's information set as in Romer and Romer (2004), I propose a new method of constructing a monetary policy shock … that occurs on Federal Reserve announcement days. I provide substantial evidence that the new monetary policy shock is … consistent with the predictions of workhorse macroeconomic models for structural monetary policy shocks. The new shock has large …

Persistent link: https://www.econbiz.de/10012546138

Inflation targeting as a shock absorber

Fratzscher, Marcel; Große Steffen, Christoph; Rieth, Malte - 2018

We study the characteristics of inflation targeting as a shock absorber, using quarterly data for a large panel of …

Persistent link: https://www.econbiz.de/10011790769

The Challenges of the 'New Economy' for Monetary Policy

Cette, Gilbert - 2010

The advent and spread of information and communication technologies (ICTs) increase potential output growth. It is uncertain to what extent and for how long they do so. We use the term "new economy" (NE) to describe the acceleration in potential output growth and the attendant and partly...

Persistent link: https://www.econbiz.de/10013134963

A horse race of alternative monetary policy regimes under bounded rationality

Wagner, Joel; Schlanger, Tudor; Zhang, Yang - 2022

We introduce bounded rationality, along the lines of Gabaix (2020), in a canonical New Keynesian model calibrated to match Canadian macroeconomic data since Canada's adoption of inflation targeting. We use the model to provide a quantitative assessment of the macroeconomic impact of flexible...

Persistent link: https://www.econbiz.de/10013161512

Selected Issues Concerning Monetary Policy and Institutional Design for Central Banks A Review of Theories

Beddies, Christian - 2021

In the past decades, much work has been geared toward solving the problem of time inconsistency in monetary policy and analyzing the coordination problem between fiscal and monetary policy. This paper provides a review of the theoretical background to these theories, while also focusing on their...

Persistent link: https://www.econbiz.de/10013317854

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