Endogenous Inflation - The Role of Expectations and Strategic Interaction
Macroeconomic fluctuations always are the result of complex interactive processes. For this reason, our challenge of the widely used New Keynesian Phillips Curve builds on Taylor's (1979) version, which provides room for a richer sequential and interactive structure. We show that the Taylor model can be fruitfully complemented by the assumption of a �timeless� optimizing central bank. The macroeconomic equilibrium exhibits a significant degree of inflation inertia which is an endogenous economic result and not merely the consequence of exogenous persistence in aggregate real activity. This result is in stark contrast to earlier work by Kiley (2002) who found the New Keynesian Phillips curve to show more persistent reactions than its Taylor (1979) companion when being exposed to an exogenous monetary shocks.
|Date of creation:||30 Jan 2005|
|Date of revision:|
|Note:||I would like to thank Björn Frank, Oliver Kirchkamp, and Daniel Schunk for helpful comments.|
|Contact details of provider:|| Postal: |
Phone: (49) (0) 621-292-2547
Fax: (49) (0) 621-292-5594
Web page: http://www.sfb504.uni-mannheim.de/
More information through EDIRC
Web page: http://www.sfb504.uni-mannheim.de
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vestin, David, 2000. "Price-level Targeting versus Inflation Targeting in a Forward-looking Model," Working Paper Series 106, Sveriges Riksbank (Central Bank of Sweden).
- Holden, Steinar & Driscoll, John C., 2003.
"Coordination, Fair Treatment and Inflation Persistence,"
25/2002, Oslo University, Department of Economics.
- John C. Driscoll & Steinar Holden, 2003. "Coordination, fair treatment and inflation persistence," Finance and Economics Discussion Series 2003-34, Board of Governors of the Federal Reserve System (U.S.).
- John C. Driscoll & Steinar Holden, 2002. "Coordination, Fair Treatment and Inflation Persistence," NBER Working Papers 9174, National Bureau of Economic Research, Inc.
- Currie,David & Levine,Paul, 1993.
"Rules, Reputation and Macroeconomic Policy Coordination,"
Cambridge University Press, number 9780521441964.
- Currie,David & Levine,Paul, 2009. "Rules, Reputation and Macroeconomic Policy Coordination," Cambridge Books, Cambridge University Press, number 9780521104609.
- John C. Driscoll & Steinar Holden, 2003.
"Inflation persistence and relative contracting,"
Finance and Economics Discussion Series
2003-29, Board of Governors of the Federal Reserve System (U.S.).
- John M. Roberts, 1994.
"Is inflation sticky?,"
Working Paper Series / Economic Activity Section
152, Board of Governors of the Federal Reserve System (U.S.).
- John M. Roberts, 1998. "Inflation expectations and the transmission of monetary policy," Finance and Economics Discussion Series 1998-43, Board of Governors of the Federal Reserve System (U.S.).
- F. Brayton & P. Tinsley, 1996. "A guide to FRB/US: a macroeconomic model of the United States," Finance and Economics Discussion Series 96-42, Board of Governors of the Federal Reserve System (U.S.).
- Brayton, Flint & Levin, Andrew & Lyon, Ralph & Williams, John C., 1997. "The evolution of macro models at the Federal Reserve Board," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 43-81, December.
- Michael T. Kiley, 1999.
"Partial adjustment and staggered price setting,"
Finance and Economics Discussion Series
1999-01, Board of Governors of the Federal Reserve System (U.S.).
- Amato, Jeffery D. & Laubach, Thomas, 2003.
"Rule-of-thumb behaviour and monetary policy,"
European Economic Review,
Elsevier, vol. 47(5), pages 791-831, October.
- Jensen, Christian & McCallum, Bennett T., 2002.
"The non-optimality of proposed monetary policy rules under timeless perspective commitment,"
Elsevier, vol. 77(2), pages 163-168, October.
- Christian Jensen & Bennett C. McCallum, 2002. "The Non-Optimality of Proposed Monetary Policy Rules Under Timeless-Perspective Commitment," NBER Working Papers 8882, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:xrs:sfbmaa:05-14. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carsten Schmidt)The email address of this maintainer does not seem to be valid anymore. Please ask Carsten Schmidt to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.