Replication data for: Optimal Inflation for the US Economy
Principal Investigator(s): View help for Principal Investigator(s) Roberto M. Billi
Version: View help for Version V1
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Project Citation:
Billi, Roberto M. Replication data for: Optimal Inflation for the US Economy. Nashville, TN: American Economic Association [publisher], 2011. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114226V1
Project Description
Summary:
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This paper studies the optimal long-run inflation rate (OIR) in a small New Keynesian model, where the only policy instrument is a short-term nominal interest rate that may occasionally run against a zero lower bound (ZLB). The model allows for worst-case scenarios of
misspecification. The analysis shows first, if the government optimally commits, the OIR is below 1 percent annually. Second, if the government re-optimizes each period, the OIR rises markedly to 17 percent. Third, if the government commits only to an inertial Taylor rule, the inflation bias is eliminated at very low cost in terms of welfare for the representative household. (JEL E12, E31, E43, E52, E58)
Scope of Project
JEL Classification:
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E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E31 Price Level; Inflation; Deflation
E43 Interest Rates: Determination, Term Structure, and Effects
E52 Monetary Policy
E58 Central Banks and Their Policies
E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E31 Price Level; Inflation; Deflation
E43 Interest Rates: Determination, Term Structure, and Effects
E52 Monetary Policy
E58 Central Banks and Their Policies
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