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Inflation and the Timing of Actions With Discretionary Monetary Policy

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The degree of inflation bias in sticky-price models can depend on the order of actions within a period. If the central bank moves last, it takes the inflation rate as given and targets the markup, leading to a higher equilibrium inflation rate. We provide a simple static model to explain this mechanism.

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  • Willem Van Zandweghe & Alexander L. Wolman, 2025. "Inflation and the Timing of Actions With Discretionary Monetary Policy," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 25(40), October.
    • Handle: RePEc:fip:fedreb:102006
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