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Dampened expectations in the Phillips Curve: a note

Dennery, Charles (2019): Dampened expectations in the Phillips Curve: a note. Published in: Economics Letters , Vol. 184, (November 2019)

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Abstract

Dampened inflation expectations have a significant impact on the New Keynesian Phillips Curve. This dampening not only flattens the long run Phillips Curve, but it can also lead to a bias in the estimation of its short run slope. It also affects the response of a small NK model to demand shocks, and affects the optimal monetary policy: in particular, the price targeting result of the Ramsey policy is violated when there is dampening.

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