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Disagreement and Monetary Policy

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  • Elisabeth Falck

    (Goethe University Frankfurt)

  • Mathias Hoffmann

    (Deutsche Bundesbank)

  • Patrick Hürtgen

    (Deutsche Bundesbank)

Abstract

Time-variation in disagreement about inflation expectations is a stylized fact in survey data, but little is known on how disagreement interacts with the efficacy of monetary policy. In times of high disagreement we estimate that a 100 bps increase in the U.S. policy rate leads to a significant short-term increase in inflation and in inflation expectations of up to 1.0 percentage point, whereas in times of low disagreement we find a significant decline of close to 1.0 percentage point. We reconcile these state-dependent effects with a dispersed information New Keynesian model, where we calibrate the level of disagreement to U.S. data.

Suggested Citation

  • Elisabeth Falck & Mathias Hoffmann & Patrick Hürtgen, 2018. "Disagreement and Monetary Policy," 2018 Meeting Papers 655, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:655
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    Cited by:

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    2. Carola Conces Binder, 2021. "Central Bank Communication and Disagreement about the Natural Rate Hypothesis," International Journal of Central Banking, International Journal of Central Banking, vol. 17(2), pages 81-123, June.
    3. Juan Camilo Galvis Ciro & Juan Camilo Anzoátegui Zapata, 2019. "Disagreement in inflation expectations: empirical evidence for Colombia," Applied Economics, Taylor & Francis Journals, vol. 51(40), pages 4411-4424, August.
    4. Franz, Thorsten, 2019. "Monetary policy, housing, and collateral constraints," Discussion Papers 02/2019, Deutsche Bundesbank.

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    More about this item

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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