JOINT VIENNA MACROECONOMICS SEMINAR	INVITATION
The Joint Vienna Institute and the Institute for Advanced Studies cordially invite you to the following Joint Vienna Macroeconomics Seminar Tuesday, May 30, 2017 Institute for Advanced Studies Josefstädter Straße 39, 1080 Vienna Lecture Room E02, ground floor 5:00 pm Paul de Grauwe LSE European Institute Inflation targets and the zero lower bound in a behavioral macroeconomic model Abstract: We analyse the relation between the level of the inflation target and the zero lower bound (ZLB) imposed on the nominal interest rate in the framework of a behavioral New-Keynesian macroeconomic model in which agents, experiencing cognitive limitations, use adaptive learning forecasting rules. The model produces endogenous waves of optimism and pessimism (animal spirits) that lead to non-normal distributions of the output gap. We find that when the inflation target is too close to zero, the economy can get gripped by “chronic pessimism” that leads to a dominance of negative output gaps and recessions, and in turn feeds back on expectations producing long waves of pessimism. Low inflation targets create the risk of persistence of recessions and low growth. We conclude that the 2% inflation target, now pursued by many central banks, is too low. paper jointly with Yuemei Ji (University College London) We are looking forward to seeing you! IHS Institute for Advanced Studies Josefstädter Straße 39, 1080 Vienna, Austria Tel.: +43 1 599 91 - 0 e-Mail: economics@ihs.ac.at http://www.ihs.ac.at		LINKS DIRECTIONS TO IHS on Google maps JOINT VIENNA MACRO SEMINAR on Google calendar ECONOMICS SEMINARS IN VIENNA on Google calendar
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