Learning by disinflating
Disinflationary episodes are a valuable source of information for economic agents trying to learn about the economy. This paper is especially interested in how a policymaker can themselves learn by disinflating. The approach differs from the existing literature, which typically focuses on the lear...
| Main Authors: | , |
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| Format: | Working paper |
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University of Oxford
2011
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| _version_ | 1826267302665912320 |
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| author | Ellison, M Ellison, M Barnett, A |
| author_facet | Ellison, M Ellison, M Barnett, A |
| author_sort | Ellison, M |
| collection | OXFORD |
| description | Disinflationary episodes are a valuable source of information for economic agents trying to learn about the economy. This paper is especially interested in how a policymaker can themselves learn by disinflating. The approach differs from the existing literature, which typically focuses on the learning of private agents during a disinflation. We build a model where both the policymaker and private agents learn, and ask what happens if the poicymaker has to disinflate to satisfy a new central bank mandate specifying greater emphasis on inflation stabilisation. In this case, our results show that inflation may fall dramatically before it gradually rises to its new long run level. The potential for inflation to undershoot its long run level during a disinflationary episode suggests that caution should be exercised when assessing the success of any change in the policymaker's mandate. |
| first_indexed | 2024-03-06T20:52:06Z |
| format | Working paper |
| id | oxford-uuid:37f0dce3-80c3-41b2-bb0f-ac2449ef9a76 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T20:52:06Z |
| publishDate | 2011 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:37f0dce3-80c3-41b2-bb0f-ac2449ef9a762022-03-26T13:47:03ZLearning by disinflatingWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:37f0dce3-80c3-41b2-bb0f-ac2449ef9a76Symplectic ElementsBulk import via SwordUniversity of Oxford2011Ellison, MEllison, MBarnett, ADisinflationary episodes are a valuable source of information for economic agents trying to learn about the economy. This paper is especially interested in how a policymaker can themselves learn by disinflating. The approach differs from the existing literature, which typically focuses on the learning of private agents during a disinflation. We build a model where both the policymaker and private agents learn, and ask what happens if the poicymaker has to disinflate to satisfy a new central bank mandate specifying greater emphasis on inflation stabilisation. In this case, our results show that inflation may fall dramatically before it gradually rises to its new long run level. The potential for inflation to undershoot its long run level during a disinflationary episode suggests that caution should be exercised when assessing the success of any change in the policymaker's mandate. |
| spellingShingle | Ellison, M Ellison, M Barnett, A Learning by disinflating |
| title | Learning by disinflating |
| title_full | Learning by disinflating |
| title_fullStr | Learning by disinflating |
| title_full_unstemmed | Learning by disinflating |
| title_short | Learning by disinflating |
| title_sort | learning by disinflating |
| work_keys_str_mv | AT ellisonm learningbydisinflating AT ellisonm learningbydisinflating AT barnetta learningbydisinflating |