Expectational stability under non-zero trend inflation

Kobayashi, Teruyoshi and Muto, Ichiro (2009): Expectational stability under non-zero trend inflation.

Abstract

This study examines the expectational stability of the rational expectation equilibria(REE) under Taylor rules when trend inflation is non-zero. We find that whether or not a higher (lower) trend inflation makes the REE more (less) unstable depends largely on the data (such as contemporaneous data, forecasts and lagged data) used in the conduct of monetary policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: adaptive learning, E-stability, Taylor rule, trend inflation
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations ; Speculations; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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