Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers.
We generalize the analysis of inflation bias with dynamic Phillips curves in three respects. First, we examine the discretionary (time consistent) solution in cases where the Phillips curve has both a backward-looking and forward-looking component. Second, we show that the commitment (time inconsist...
| Main Authors: | , , |
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| Format: | Journal article |
| Language: | English |
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Berkley Electronic Press
2009
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| _version_ | 1797058967056154624 |
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| author | Kirsanova, T Vines, D Wren-Lewis, S |
| author_facet | Kirsanova, T Vines, D Wren-Lewis, S |
| author_sort | Kirsanova, T |
| collection | OXFORD |
| description | We generalize the analysis of inflation bias with dynamic Phillips curves in three respects. First, we examine the discretionary (time consistent) solution in cases where the Phillips curve has both a backward-looking and forward-looking component. Second, we show that the commitment (time inconsistent) solution does not normally involve zero inflation and output at its natural rate. Instead, with a purely forward-looking Phillips curve and positive discounting, it will involve a dynamic path for inflation in which steady state inflation is below its target. In this sense, we obtain negative inflation bias. Third, we show that the timeless perspective policy has the same steady state as the commitment case, but without any short-term output gains. |
| first_indexed | 2024-03-06T19:57:33Z |
| format | Journal article |
| id | oxford-uuid:2626bf55-3cf0-479f-aaa9-32fe50b0ff92 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T19:57:33Z |
| publishDate | 2009 |
| publisher | Berkley Electronic Press |
| record_format | dspace |
| spelling | oxford-uuid:2626bf55-3cf0-479f-aaa9-32fe50b0ff922022-03-26T11:59:21ZInflation Bias with Dynamic Phillips Curves and Impatient Policy Makers.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:2626bf55-3cf0-479f-aaa9-32fe50b0ff92EnglishDepartment of Economics - ePrintsBerkley Electronic Press2009Kirsanova, TVines, DWren-Lewis, SWe generalize the analysis of inflation bias with dynamic Phillips curves in three respects. First, we examine the discretionary (time consistent) solution in cases where the Phillips curve has both a backward-looking and forward-looking component. Second, we show that the commitment (time inconsistent) solution does not normally involve zero inflation and output at its natural rate. Instead, with a purely forward-looking Phillips curve and positive discounting, it will involve a dynamic path for inflation in which steady state inflation is below its target. In this sense, we obtain negative inflation bias. Third, we show that the timeless perspective policy has the same steady state as the commitment case, but without any short-term output gains. |
| spellingShingle | Kirsanova, T Vines, D Wren-Lewis, S Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers. |
| title | Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers. |
| title_full | Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers. |
| title_fullStr | Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers. |
| title_full_unstemmed | Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers. |
| title_short | Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers. |
| title_sort | inflation bias with dynamic phillips curves and impatient policy makers |
| work_keys_str_mv | AT kirsanovat inflationbiaswithdynamicphillipscurvesandimpatientpolicymakers AT vinesd inflationbiaswithdynamicphillipscurvesandimpatientpolicymakers AT wrenlewiss inflationbiaswithdynamicphillipscurvesandimpatientpolicymakers |