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Inflation persistence and monetary policy design - an overview

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Abstract

How monetary policy should be set optimally when the structure of the economy exhibits inflation persistence is an important question for policy makers. This paper provides an overview of the implications of inflation persistence for the design of monetary policy.

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File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp539.pdf
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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 539.

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Length: 27 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:ecb:ecbwps:20050539

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Keywords: Inflation persistence; optimal monetary policy; uncertainty.;

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References

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  1. Alexei Onatski & Noah Williams, 2004. "Empirical and policy performance of a forward-looking monetary model," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  2. Levin, Andrew T. & Williams, John C., 2003. "Robust monetary policy with competing reference models," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 945-975, July.
  3. Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings, Federal Reserve Bank of Kansas City, pages 277-316.
  4. Richhild Moessner, 2005. "Optimal discretionary policy and uncertainty about inflation persistence," Working Paper Series 540, European Central Bank.
  5. Athanasios Orphanides & John C. Williams, 2003. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Working Papers 9884, National Bureau of Economic Research, Inc.
  6. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
  7. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  8. Malcolm D. Knight & Chair, 2003. "Implications of a changing economic structure for the strategy of monetary policy," Proceedings, Federal Reserve Bank of Kansas City, pages 361-371.
  9. John C. Williams & Andrew T. Levin, 2003. "Parameter Uncertainty and the Central Bank's Objective Function," Computing in Economics and Finance 2003 215, Society for Computational Economics.
  10. Benigno, Pierpaolo & Lopez-Salido, J. David, 2006. "Inflation Persistence and Optimal Monetary Policy in the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 587-614, April.
  11. Frank Smets & Ignazio Angeloni & Gunter Coenen, 2003. "Persistence, the Transmission Mechanism and Robust Monetary Policy," Computing in Economics and Finance 2003 137, Society for Computational Economics.
  12. Lars E. O. Svensson & Michael Woodford, 2003. "Implementing Optimal Policy through Inflation-Forecast Targeting," NBER Working Papers 9747, National Bureau of Economic Research, Inc.
  13. Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999. "Optimal monetary policy with staggered wage and price contracts," International Finance Discussion Papers 640, Board of Governors of the Federal Reserve System (U.S.).
  14. Amato, Jeffery D. & Laubach, Thomas, 2003. "Rule-of-thumb behaviour and monetary policy," European Economic Review, Elsevier, vol. 47(5), pages 791-831, October.
  15. Walsh, Carl E., 2004. "Implications of a Changing Economic Structure for the Strategy of Monetary Policy," Santa Cruz Center for International Economics, Working Paper Series qt84g1q1g6, Center for International Economics, UC Santa Cruz.
  16. Takeshi Kimura & Takushi Kurozumi, 2003. "Optimal monetary policy in a micro-founded model with parameter uncertainty," Finance and Economics Discussion Series 2003-67, Board of Governors of the Federal Reserve System (U.S.).
  17. Jón Steinsson, 2000. "Optimal monetary policy in an economy with inflation persistence," Economics wp11, Department of Economics, Central bank of Iceland.
  18. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Interest-Rate Rules: I. General Theory," Levine's Bibliography 506439000000000384, UCLA Department of Economics.
  19. Andrew T. Levin & Alexei Onatski & John C. Williams & Noah Williams, 2005. "Monetary policy under uncertainty in micro-founded macroeconometric models," Working Papers in Applied Economic Theory 2005-15, Federal Reserve Bank of San Francisco.
  20. Coenen, Gunter, 2007. "Inflation persistence and robust monetary policy design," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 111-140, January.
  21. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Inflation Targeting Rules," NBER Working Papers 9939, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Juan Manuel Julio & Héctor Manuel Zárate, . "The Price Setting Behavior in Colombia: Evidence from PPI Micro Data," Borradores de Economia 483, Banco de la Republica de Colombia.
  2. Mewael F. Tesfaselassie & Eric Schaling & Sylvester Eijffinger, 2007. "Learning About the Term Structure and Optimal Rules for Inflation Targeting," Working Papers 62, Economic Research Southern Africa.
  3. Simeon Coleman, 2008. "Inflation persistence in the Franc Zone: evidence from disaggregated prices," Working Papers 2008/16, Nottingham Trent University, Nottingham Business School, Economics Division.
  4. Kevin J. Lansing, 2006. "Time-Varying U.S. Inflation Dynamics and the New Keynesian Phillips Curve," Computing in Economics and Finance 2006 488, Society for Computational Economics.
  5. Karlygash Kuralbayeva, 2007. "Inflation persistence: Implications for a design of monetary policy in a small open economy subject to external shocks," CEIS Research Paper 93, Tor Vergata University, CEIS.
  6. Sevim Kosem Alp, 2010. "Optimal Monetary Policy under Sectoral Heterogeneity in Inflation Persistence (Sektorel Enflasyon Ataleti Farkliligi Altinda Optimal Para Politikasi)," Working Papers 1004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  7. Juan Paez-Farrell, 2009. "Timeless perspective vs discretionary policymaking when the degree of inflation persistence is unknown," Discussion Paper Series 2009_14, Department of Economics, Loughborough University, revised Sep 2009.
  8. Richhild Moessner, 2005. "Optimal discretionary policy and uncertainty about inflation persistence," Working Paper Series 540, European Central Bank.
  9. Fielding, David & Shields, Kalvinder, 2006. "Regional asymmetries in monetary transmission: The case of South Africa," Journal of Policy Modeling, Elsevier, vol. 28(9), pages 965-979, December.
  10. Sevim Kosem-Alp, 2009. "The (Ir)relevance of Inflation Persistence for Inflation Targeting Policy Design," Departmental Working Papers 0903, Bilkent University, Department of Economics.

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