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Dampened expectations in the Phillips Curve: A note

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  • Dennery, Charles

Abstract

Dampened inflation expectations have a significant impact on the New Keynesian Phillips Curve. This dampening not only flattens the long run Phillips Curve, but it can also lead to a bias in the estimation of its short run slope. It also affects the response of a small NK model to demand shocks, and affects the optimal monetary policy: in particular, the price targeting result of the Ramsey policy is violated when there is dampening.

Suggested Citation

  • Dennery, Charles, 2019. "Dampened expectations in the Phillips Curve: A note," Economics Letters, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:ecolet:v:184:y:2019:i:c:s0165176519303167
    DOI: 10.1016/j.econlet.2019.108642
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    Cited by:

    1. Aquino, Juan, 2019. "The Small Open Economy New-Keynesian Phillips Curve: Specification, Structural Breaks and Robustness," Working Papers 2019-019, Banco Central de Reserva del Perú.

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    More about this item

    Keywords

    Anchored expectations; Phillips Curve; Ramsey policy;
    All these keywords.

    JEL classification:

    • 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

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