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We develop a theoretical framework to quantitatively assess the general equilibrium effects and welfare implications of central bank reputation and transparency. Monetary policy alternates between periods of active inflation stabilization and periods during which the emphasis on inflation...
Persistent link: https://www.econbiz.de/10011084074
While high uncertainty is an inherent implication of entering the zero lower bound, deflation is not, because agents are likely to be uncertain about the way policy makers will deal with the large stock of debt arising from a severe recession. We draw this conclusion based on a standard...
Persistent link: https://www.econbiz.de/10011084115
Can monetary policy trigger pronounced boom-bust cycles in house prices and create persistent business cycles? We address this question by building heuristics into an otherwise standard DSGE model. As a result, monetary policy sets off waves of optimism and pessimism ('animal spirits') that...
Persistent link: https://www.econbiz.de/10011084289
In this Paper, we suggest a new motivation for why central banks appear averse to reversing recent changes in their interest rate. We show, in a standard monetary model with forward-looking expectations, data uncertainty and parameter uncertainty, that there is a learning cost associated with...
Persistent link: https://www.econbiz.de/10005667117
A central tenet of inflation targeting is that establishing and maintaining well-anchored inflation expectations are essential. In this paper, we reexamine the role of key elements of the inflation targeting framework towards this end, in the context of an economy where economic agents have an...
Persistent link: https://www.econbiz.de/10005791794
Some central banks have a reputation for being secretive. A justification for this behaviour that we find in the literature is that being transparent about operations and beliefs hinders the central bank in achieving the best outcome. In other words, a central bank needs flexibility and...
Persistent link: https://www.econbiz.de/10005124006
This paper develops a dynamic stochastic general equilibrium model with rational inattention. Households and decision-makers in firms have limited attention and decide how to allocate their attention. The paper studies the implications of rational inattention for business cycle dynamics. Impulse...
Persistent link: https://www.econbiz.de/10008468587
We analyse the consumption strategy of a dynamically inconsistent individual for goods that provide an immediate benefit and a delayed cost. The agent has incomplete information on the cost inherent to each unit of consumption and partially learns this value anytime he consumes. We show that, by...
Persistent link: https://www.econbiz.de/10005504250
In this Paper, an explicit micro scenario is developed which yields a well-defined aggregate job-matching function. In particular, a stochastic model of job-matching behaviour is constructed in which the system steady state is shown to be approximated by an exponential-type matching function, as...
Persistent link: https://www.econbiz.de/10005504280
We study a search model where workers can apply to high and or low productivity firms. Firms that compete for the same candidate can increase their wage offers as often as they like. We show that if workers apply to two jobs, there is a unique symmetric equilibrium where workers mix between...
Persistent link: https://www.econbiz.de/10005504344