This paper investigates the macroeconomic risks associated with undesirably low inflation using a medium-sized New … Keynesian model. We consider different causes of persistently low inflation, including a downward shift in long-run inflation … persistently low inflation depend crucially on its underlying cause, as well as on the extent to which monetary policy is …

In a basic New Keynesian DSGE model with involuntary unemployment and inflation target shocks, we study the role of … labor markets in the transmission of persistent monetary policy shocks that increase households' inflation expectations. The … model predicts that labor market conditions can play important role in the transmission channel of the persistent inflation …

is derived from policy-makers' preferences about inflation outcomes, we first show that downside risks to price stability … future inflation can provide insurance against the materialisation of such upside risks. …

commiting to keep interest rates low at the exit of the liquidity trap, to stabilize inflation today. 2. From debt … interest rates. Liquidity trap (LT) episodes are longer, however, the impact of interest rate policy commitments on inflation … positive at the onset of the episode, through promising higher inflation rates in future periods. We embed our theory into a …

Central banks in most advanced economies have reacted similarly to the increase in inflation that started in 2021. They … initially looked through the rising inflation by leaving monetary policy relatively unchanged. Then, after inflation continued … aiming to anchor drifting inflation expectations. Why might central banks want to look through supply-driven inflation …

) could be efficacious in boosting output and inflation in economies facing persistent economic weakness, very low inflation, and … persistently high inflation if the central bank fully adhered to the program; or alternatively, that such a program would be …

commiting to keep interest rates low at the exit of the liquidity trap, to stabilize inflation today. 2. From debt … interest rates. Liquidity trap (LT) episodes are longer, however, the impact of interest rate policy commitments on inflation … positive at the onset of the episode, through promising higher inflation rates in future periods. We embed our theory into a …