price model a 'weak' central bank response to inflation generates sunspot fluctuations, the consequences of pooling … of inflation persistence had not been investigated. Using Monte Carlo simulations from a purely forward-looking model …, this paper shows that indeterminacy can introduce a sizable persistence in the process of inflation. On the reduced form …

We develop a model that can explain the evolution of trend inflation in the United States in the three decades before … inflation arises endogenously and has these determinants: the strength with which the central bank responds to inflation, the … degree of uncertainty about monetary policy perceived by the private sector, and, if it exists, the inflation target. Given …

, we find that monetary policy has persistent effects on real interest rates and breakeven inflation. Second, employing our …

respond to movements in sectoral inflation rates. To do this we construct a Generalised Taylor model that takes specific … drive sectoral inflation rates as white noise processes, as in the UK data. We find that a policy rule that allows for … different responses to inflation in different sectors outperforms a rule which just targets aggregate CPI. However, the gain is …

the UK economy. We find that a 1 percentage point increase in the policy rate reduces output by up to 0.6% and inflation …

emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast …