Expectational stability under non-zero trend inflation

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Expectational stability under non-zero trend inflation

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Kobayashi, Teruyoshi
Muto, Ichiro

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Abstract

This study examines the expectational stability of the rational expectation equilibria(REE) under Taylor rules when trend inflation is non-zero. We find that whether or not a higher (lower) trend inflation makes the REE more (less) unstable depends largely on the data (such as contemporaneous data, forecasts and lagged data) used in the conduct of monetary policy.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17082.

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Date of creation: 03 Sep 2009
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Handle: RePEc:pra:mprapa:17082

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Find related papers by JEL classification:
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-09-05 (All new papers)
NEP-CBA-2009-09-05 (Central Banking)
NEP-MAC-2009-09-05 (Macroeconomics)
NEP-MIC-2009-09-05 (Microeconomics)
NEP-MON-2009-09-05 (Monetary Economics)

References listed on IDEAS
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Michael T. Kiley, 2007. "Is Moderate-to-High Inflation Inherently Unstable?," International Journal of Central Banking, International Journal of Central Banking, vol. 3(2), pages 173-201, June. [Downloadable!]
Other versions:
- Michael T. Kiley, 2004. "Is moderate-to-high inflation inherently unstable?," Finance and Economics Discussion Series 2004-43, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
- Michael Kiley, 2004. "Is Moderate-To-High Inflation Inherently Unstable?," Econometric Society 2004 North American Summer Meetings 193, Econometric Society. [Downloadable!]
Guido Ascari & Tiziano Ropele, 2007. "Optimal monetary policy under low trend inflation," Temi di discussione (Economic working papers) 647, Bank of Italy, Economic Research Department. [Downloadable!]
Other versions:
- Ascari, Guido & Ropele, Tiziano, 2007. "Optimal monetary policy under low trend inflation," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2568-2583, November. [Downloadable!] (restricted)
Guido Ascari & Tiziano Ropele, 2009. "Trend inflation, Taylor principle and indeterminacy," Temi di discussione (Economic working papers) 708, Bank of Italy, Economic Research Department. [Downloadable!]
Other versions:
- Guido Ascari & Tiziano Ropele, 2007. "Trend Inflation, Taylor Principle and Indeterminacy," Kiel Working Papers 1332, Kiel Institute for the World Economy. [Downloadable!]
- Guido Ascari & Tiziano Ropele, 2005. "Trend Inflation, Taylor Principle and Indeterminacy," Working Papers 93, University of Milano-Bicocca, Department of Economics, revised Oct 2005. [Downloadable!]
Bullard, James & Mitra, Kaushik, 2002. "Learning about monetary policy rules," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1105-1129, September. [Downloadable!] (restricted)
Other versions:
- Kaushik Mitra & James Bullard, . "Learning About Monetary Policy Rules," Discussion Papers 00/41, Department of Economics, University of York. [Downloadable!]
- James Bullard & Kaushik Mitra, 2002. "Learning about monetary policy rules," Working Papers 2000-001, Federal Reserve Bank of St. Louis. [Downloadable!]
Argia M. Sbordone, 2007. "Inflation persistence: alternative interpretations and policy implications," Staff Reports 286, Federal Reserve Bank of New York. [Downloadable!]
Other versions:
- Sbordone, Argia M., 2007. "Inflation persistence: Alternative interpretations and policy implications," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1311-1339, July. [Downloadable!] (restricted)

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