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Monetary Misperceptions, Output, and Inflation Dynamics

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  • FABRICE COLLARD
  • HARRIS DELLAS

Abstract

We revisit the contribution of misperceived money to business cycles and, in particular, to the inertial dynamics of inflation following a monetary policy shock. We establish three things. First, the difference between preliminary and revised money data captures monetary misperceptions well. Second, misperceived money is quantitatively substantial and also matters significantly for economic activity. And third, imperfect information about monetary aggregates can help the standard NK model exhibit inertial inflation dynamics. Copyright (c) 2010 The Ohio State University.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 42 (2010)
Issue (Month): 2-3 (03)
Pages: 483-502

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Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:2-3:p:483-502

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. Stanley Fischer, 1980. "Rational Expectations and Economic Policy," NBER Books, National Bureau of Economic Research, Inc, number fisc80-1, June.
  2. Dellas, Harris, 2006. "Monetary Shocks and Inflation Dynamics in the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 543-551, March.
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  9. Robert J. Barro & Mark Rush, 1980. "Unanticipated Money and Economic Activity," NBER Chapters, in: Rational Expectations and Economic Policy, pages 23-73 National Bureau of Economic Research, Inc.
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  13. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
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Cited by:
  1. Collard, Fabrice & Dellas, Harris & Smets, Frank, 2010. "Imperfect information and the business cycle," CEPR Discussion Papers 7643, C.E.P.R. Discussion Papers.
  2. Baxter, Brad & Graham, Liam & Wright, Stephen, 2011. "Invertible and non-invertible information sets in linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 295-311, March.
  3. Givens, Gregory & Salemi, Michael, 2012. "Inferring monetary policy objectives with a partially observed state," MPRA Paper 39353, University Library of Munich, Germany.

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