Inflation Bias with Dynamic Phillips Curves.
We generalise 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: | Working paper |
| Language: | English |
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CEPR
2006
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| _version_ | 1826294375034912768 |
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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 generalise 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 | 2024-03-07T03:44:39Z |
| format | Working paper |
| id | oxford-uuid:bf0cbe90-95b4-4040-9176-45334cba1487 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T03:44:39Z |
| publishDate | 2006 |
| publisher | CEPR |
| record_format | dspace |
| spelling | oxford-uuid:bf0cbe90-95b4-4040-9176-45334cba14872022-03-27T05:44:32ZInflation Bias with Dynamic Phillips Curves.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:bf0cbe90-95b4-4040-9176-45334cba1487EnglishDepartment of Economics - ePrintsCEPR2006Kirsanova, TVines, DWren-Lewis, SWe generalise 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. |
| title | Inflation Bias with Dynamic Phillips Curves. |
| title_full | Inflation Bias with Dynamic Phillips Curves. |
| title_fullStr | Inflation Bias with Dynamic Phillips Curves. |
| title_full_unstemmed | Inflation Bias with Dynamic Phillips Curves. |
| title_short | Inflation Bias with Dynamic Phillips Curves. |
| title_sort | inflation bias with dynamic phillips curves |
| work_keys_str_mv | AT kirsanovat inflationbiaswithdynamicphillipscurves AT vinesd inflationbiaswithdynamicphillipscurves AT wrenlewiss inflationbiaswithdynamicphillipscurves |