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Can the story of evolving Federal Reserve beliefs in The Conquest of American Inflation simultaneously explain the Great Inflation and the forecasts published in the Greenbook during that time? If Sargent is correct then evolving beliefs should be reflected not only in policy outcomes but also...
Persistent link: https://www.econbiz.de/10008521052
The assumption of asymmetric and incomplete information in a standard New Keynesian model creates strong incentives for monetary policy transparency. We assume that the central bank has better information about its objectives than the private sector, and that the private sector has better...
Persistent link: https://www.econbiz.de/10008864833
We respond to the challenge of explaining the Great Inflation by building a coherent framework in which both learning and uncertainty play a central role. At the heart of our story is a Federal Reserve that learns and then disregards the Phillips curve as in Sargent's Conquest of American...
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In this paper, we examine the incentives for central bank activism and caution in a two-country open-economy model with uncertainty and learning. We find that the presence of a strategic interaction between the home and foreign central banks creates an additional motivation for caution in...
Persistent link: https://www.econbiz.de/10012737442
A well-known time-inconsistency problem hinders optimal decision-making when policymakers are constrained in their pesent choices by expectations of future outcomes.  The time-inconsistency problem is caused by differences in the preferences of policymakers who exist at different points in...
Persistent link: https://www.econbiz.de/10011277854
The financial crisis highlighted the importance of systemic risks and of policies that can be employed to prevent and mitigate them. Several recent initiatives aim at establishing institutional frameworks for macro-prudential policy. As this process advances further, substantial uncertainties...
Persistent link: https://www.econbiz.de/10011107191
Term premia are shown to provide crucial information for discriminating among alternative sources of change in the economy, and namely shifts in the variance of structural shocks and in monetary policy. These sources have been identified as competing explanations for time-varying features of...
Persistent link: https://www.econbiz.de/10011067243