An experimental test of Taylor-type rules with inexperienced central bankers

Abstract

Monetary policy, Taylor rule, Experimental economics, Repeated games, C91, E42,

The impact of interest rate policy on individual expectations and asset bubbles in experimental markets

“…Our paper belongs to the growing literature on experimental monetary policy and central banking Heinemann, 2014, Noussair et al, 2014). Studies in this literature (Arifovic and Sargent, 2003, Duffy and Heinemann, 2014, Engle-Warnick and Turdaliev, 2010, Cornand and M'baye, 2013 commonly investigate the impact of the interest rate policy set by the central bank on macroeconomic variables, e.g., the output gap/employment and the inflation rate. Among these studies, Cornand and M'baye (2018) use a learning-to-forecast design to study the impact of communication about a monetary policy on market outcomes and find that interest rate targeting (IT) can be helpful in stabilizing the economy if the central bank wants to stabilize economic activities, and band interest rate targeting seems to be more effective than point inflation targeting in stabilizing the inflation rate.…”

The Stabilizing Effects of Publishing Strategic Central Bank Projections

“…Foremost, Cornand and Hubert (2020) show that inflation expectations elicited from learning-to-forecast experiments share important patterns and characteristics with inflation expectations elicited from surveys (such as the Michigan Survey of Consumer Attitudes and Behavior, the Livingston Survey, and the Survey of Professional Forecasters) and inflation expectations extracted from financial instruments such as inflation swaps. Furthermore, Arifovic and Sargent (2003), Engle-Warnick and Turdaliev (2010), and Duffy and Heinemann (2021) put student subjects in the role of central bankers and show that they perform reasonably well, even in such complex and uncommon decision-making processes. 16 Since we are interested in the expectations channel of monetary policy both in normal times and in times when the zero lower bound on the nominal interest rate may become binding, in the spirit of Arifovic and Petersen (2017), starting in period 29 there is a series of four consecutive negative demand shocks.…”

Formation of economic agents’ inflationary expectations and central bank policy effectiveness: Еxperimental approach

“…Наряду с методологически отлаженными процедурами проведения опросов и последующей обработки полученных данных, позволяющими выявлять краткосрочные и долгосрочные ожидания агентов, важным инструментом получения новых знаний о формировании ожиданий становятся лабораторные эксперименты, обсуждению которых в последнее десятилетие уделяется большое внимание в макроэкономической литературе [Engle-Warnick, Turdaliev, 2010;Luhan, Scharler, 2014;Lambsdorff, Schubert, Giamattei, 2013;Kryvtsov, Petersen, 2013;Noussair, Pfajfar, Zsiros, 2015;Duffy, 2016], в том числе в работах, посвященных поведенческой макроэкономической теории [De Grauwe, Macchiarelli, 2015;Cole, Milani, 2019].…”