This paper analyzes monetary policy in a model with a potential unanchoring of inflation expectations. The degree of … unanchoring is given by how sensitively the public's long-run inflation expectations respond to inflation surprises. I find that … optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate …

policy rules: the assumed manner of expectations formation. Following a considerable literature on learning, it is assumed … learning dynamics converge to the equilibrium predicted by rational expectations equilibrium analysis. This question is … Taylor rule ensures convergence to rational expectations equilibrium, if the so-called Taylor principle is satisfied, under …

past policy has no effect on expectations of future policy. However, when people's policy forecasts are based on the … expectations of future policy, and the time-consistent solution improves. Therefore, a successful policymaker needs to know how … present policy affects people's policy expectations …

This paper analyzes monetary policy in a model with a potential unanchoring of inflation expectations. The degree of … unanchoring is given by how sensitively the public’s long-run inflation expectations respond to inflation surprises. I find that … optimal policy moves the interest rate aggressively when expectations unanchor, allowing the central bank to accommodate …

Price-level targeting (PLT) is optimal under the fully-informed rational expectations (FIRE) benchmark but lacks … experiment - where expectations are elicited from human subjects - to collect data on expectations, inflation and output dynamics … emulate the subjects' expectations with a micro-founded heterogeneous-expectation New Keynesian (HENK) model and reproduce the …

We show within a New Keynesian model with experience-based learning (EBL) that heterogeneous expectations across age … groups impair the ability of monetary policy to stabilise the economy. While experience effects on expectations reduce the … composition effect on aggregate expectations which are a size-weightedaverage over cohort-specific expectations. As the share of …

We propose a novel framework to gauge the credibility of central banks' commitment to an inflation-targeting regime …

In this paper we use a non-tatonnement dynamic macroeconomic model to study the role of inventories, expectations and … evaluate economic policies like quantitative easing as well as the effectiveness of holding inflationary expectations to … recover to full employment. If inflationary expectations are not sufficient, imposing downward rigidity of nominal wages helps …

analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for …

inflation, increases the degree of anchoring of households' inflation expectations, and flattens the slope of the Phillips curve …