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Average is good enough: average-inflation targeting and the ELB

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Authors and Corporations: Amano, Robert A. (Author), Gnocchi, Stefano (Author), Leduc, Sylvain (Author), Wagner, Joel (Author)
Other Authors: Gnocchi, Stefano [Author] • Leduc, Sylvain 1969- [Author] • Wagner, Joel [Author]
Edition: Last updated: July 16, 2020
Type of Resource: E-Book
Language: English
published:
[Ottawa] Bank of Canada [2020]
Series: Bank of Canada: Staff working paper ; 2020, 31
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Description
Summary: The Great Recession and current pandemic have focused attention on the constraint on nominal interest rates from the effective lower bound. This has renewed interest in monetary policies that embed makeup strategies, such as price-level or average-inflation targeting. This paper examines the properties of average-inflation targeting in a two-agent New Keynesian (TANK) model in which a fraction of firms have adaptive expectations. We examine the optimal degree of history dependence under average-inflation targeting and find it to be relatively short for business cycle shocks of standard magnitude and duration. In this case, we show that the properties of the economy are quantitatively similar to those under a pricelevel target.
Physical Description: 1 Online-Ressource (circa 31 Seiten); Illustrationen