A quantitative exploration of the opportunistic approach to disinflation

Aksoy, Yunus; Orphanides, Athanasios; Small, David H.; Wieland, Volker; Wilcox, David

doi:10.1016/j.jmoneco.2005.08.015

Cited by 57 publications

(42 citation statements)

References 22 publications

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“…The structural non‐linear model implied by the opportunistic approach fits the data better than a Taylor rule. In our preferred model, a slightly amended version of the model of Aksoy et al. (2006), we find that the zone of discretion is symmetric, extending from 1 per cent below the desired inflation rate to 1 per cent above.…”

Section: Introductionmentioning

confidence: 80%

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Testing the Opportunistic Approach to Monetary Policy

Martin

Milas

2010

The Manchester School

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The Opportunistic Approach to Monetary Policy is an influential but untested model of optimal monetary policy. We provide the first tests of the model, using US data from 1983Q1-2004Q1.Our results support the Opportunistic Approach. We find that policymakers respond to the gap between inflation and an intermediate target that reflects the recent history of inflation. We find that there is no response of interest rates to inflation when inflation is within 1% of the intermediate target but a strong response when inflation is further from the intermediate target.

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Section: Introductionmentioning

confidence: 80%

“…(2006) and suggests how it might be estimated. presents estimates of a Taylor rule, a Taylor rule augmented by an intermediate inflation target and the model of Aksoy et al. (2006), arguing that the latter model is not superior to the augmented Taylor rule.…”

Section: Introductionmentioning

confidence: 99%

Testing the Opportunistic Approach to Monetary Policy

Martin

Milas

2010

The Manchester School

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“…According to the proponents of the opportunistic approach to disinflation Wilcox, 2002, andAksoy et al, 2006), when inflation is moderate but still above the long-run objective, the central bank should not take deliberate actions directed at fighting inflation but, rather, should wait for exogenous circumstances -such as favorable supply shocks and unforeseen recessions-to deliver the desired reduction in inflation. Similarly, when inflation is moderate but below the long-run objective, policymakers should not take deliberate countervailing actions but, rather, should wait for inflationary shocks and unforeseen expansions to bring inflation back toward the long-run level.…”

Section: The Rationale Behind Non-linearties In Interest Rates and Inmentioning

confidence: 99%

Non-Linear Convergence in Asian Interest Rates and Inflation Rates

Kisswani

Nusair

2011

SSRN Journal

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We examine the dynamics of convergence of the ASEAN5 plus the big three for nominal interest rates, inflation rates, and real interest rates. We test for convergence relative to the U.S and Japan, using monthly data over the period January 1990 -December 2010, using non-linear unit root tests. The results show strong evidence of stationary inflation and real interest rate differentials in all but China's inflation differential relative to the U.S., and stationary nominal interest differentials in most of the cases. We interpret these results as convergence in inflation rates and real interest rates in all cases, and as nominal interest convergence in most of the cases.Moreover, examining the impact of the Asian crisis shows less number of convergences before the crisis and more convergences after the crisis. This suggests that convergence has increased after the 1997/98 Asian crisis, and that the crisis has pulled the economies together.

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“…Third, in ‡ation persistence may also depend on the how far the in ‡ation rate is from the target of the central bank. According to the opportunistic approach to disin ‡ation put forth by Orphanides and Wilcox (2002) and Aksoy et al (2006), the central bank reacts more aggressively when in ‡ation is far from the target, indicating that at very high (or low) levels of in ‡ation, shocks to in ‡ation are absorbed more rapidly.…”

Section: Introductionmentioning

confidence: 99%

Noncausality and inflation persistence

Lanne

2014

Studies in Nonlinear Dynamics &Amp; Econometrics

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A quantitative exploration of the opportunistic approach to disinflation

Cited by 57 publications

References 22 publications

Testing the Opportunistic Approach to Monetary Policy

Testing the Opportunistic Approach to Monetary Policy

Non-Linear Convergence in Asian Interest Rates and Inflation Rates

Noncausality and inflation persistence

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