The Reader's Guide to Optimal Monetary Policy

Diercks, Anthony M.

doi:10.2139/ssrn.2989237

Cited by 17 publications

(8 citation statements)

References 120 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Jenseits dieser offi ziellen, auch auf der EZB-Homepage aufgeführten Gründe für moderate Infl ation, werden in der Literatur zahlreiche zusätzliche Argumente diskutiert (Diercks, 2019). Unter Ökonom*innen scheinen insbesondere zwei Argumente starkes Gewicht zu besitzen:…”

Section: Begründungen Für Eine Moderate Positive Infl Ationsrateunclassified

Inflation, Inflationsmessung und Zentralbankpolitik

Weichenrieder

Gürer

2020

Wirtschaftsdienst

View full text Add to dashboard Cite

Section: Begründungen Für Eine Moderate Positive Infl Ationsrateunclassified

Inflation, Inflationsmessung und Zentralbankpolitik

Weichenrieder

Gürer

2020

Wirtschaftsdienst

View full text Add to dashboard Cite

“…Apart from the aforementioned studies, this paper is related to a wide literature on the optimal inflation rate surveyed in Schmitt-Grohé and Uribe (2010) and Diercks (2017). In particular, recent contributions by Coibion et al (2012) and Galí et al (2018), Carlsson and Westermark (2016), and Adam and Weber (2017) show, respectively, that the zero lower bound on nominal interest rates, the combination of labor market frictions and wage-setting externalities, and firm-level heterogeneity in productivity may provide justifications for moderately positive inflation targets.…”

Section: Introductionmentioning

confidence: 99%

The Optimal Inflation Rate with Discount Factor Heterogeneity

Lepetit

2018

FEDS

View full text Add to dashboard Cite

This paper shows that deviations from long-run price stability are optimal in the presence of price stickiness whenever profit and utility flows are discounted at a different rate. In that case, a monetary authority acting under commitment will choose a path for the inflation rate that ends with a non-zero value. Such a property is relevant in a wide range of macroeconomic environments. I first illustrate this by studying optimal monetary policy in a New Keynesian model with a perpetual youth structure. In this setting, profit flows are discounted more heavily than utility flows and the optimal inflation target is equal to 3.2 percent in a baseline calibration of the model. I also show that this property leads to a positive long-run inflation rate in models with firm entry and exit and in environments with search and matching frictions in the labor market and another form of nominal rigidity, wage stickiness.

show abstract

“…2 Ellingsen and Söderström (2001) and Bassetto (2015) are other papers that distinguish between private information about policy objectives and operational shocks, in models respectively studying yield curves and forward guidance. 3 While the extent of social uncertainty about optimal inflation has diminished over the last few decades, with many modern macroeconomic models suggesting that CBs should aim for an inflation rate of around 2%, there remains substantial heterogeneity in these assessments, as surveyed by Diercks (2017). Indeed, there has been a recent call from eminent economists that the U.S. Federal Reserve reconsider its stated 2% inflation goal (http://www.bradford-delong.com/2017/06/rethink-2.html), partly owing to concerns about the binding zero lower bound on the Federal Funds rate.…”

Section: Introductionmentioning

confidence: 99%

What kind of central bank competence?

Frankel

Kartik

2018

Theoretical Economics

View full text Add to dashboard Cite

How much information should a central bank (CB) have about (i) policy objectives and (ii) operational shocks to the effect of monetary policy? We consider a version of the Barro-Gordon credibility problem in which monetary policy signals an inflation-biased CB's private information on both these dimensions. We find that greater CB competence-more private information-about policy objectives is desirable while greater competence about operational shocks need not be. When the CB has less private information about operational shocks, the public infers that monetary policy depends more on the CB's information about objectives. Inflation expectations become more responsive to monetary policy, which mitigates the CB's temptation to produce surprise inflation.

show abstract

The Reader's Guide to Optimal Monetary Policy

Cited by 17 publications

References 120 publications

Inflation, Inflationsmessung und Zentralbankpolitik

Inflation, Inflationsmessung und Zentralbankpolitik

The Optimal Inflation Rate with Discount Factor Heterogeneity

What kind of central bank competence?

Contact Info

Product

Resources

About