Bidder, Rhys; Nikolov, Kalin; Yates, Tony - Centre for Dynamic Macroeconomic Analysis, University …
In this paper we simulate a central bank subject to the misperception that prices are indexed to past inflation in … periods when firms are unable to re-optimise. It thinks, in other words, that inflation is intrinsically persistent. The …¬dexation using a constant gain learning scheme. The data generated by such policy lead to beliefs about inflation persistence being …