Dear all,
we kindly invite you to our next ECON Theory and Policy Seminar talk on
Monday, December 11, 2023 from 4:00-5:30 pm (Seminarroom DB04 yellow, Freihaus Buidling, yellow area, 4th floor)
"On Robustness of Average Inflation Targeting"
Nigel McClung (Bank of Finland)
https://www.nigelmcclung.com/
with Seppo Honkapohja (Aalto University School of Business)
This paper considers average inflation targeting (AIT) policy in a New Keynesian model with adaptive learning agents. Our analysis raises concerns regarding AIT when agents have imperfect knowledge and the averaging window length is not public
knowledge. AIT can create severe stability risks near the inflation target steady state which would be avoided under inflation targeting (IT) or price level targeting (PLT). Near the zero interest rate steady state, AIT under-performs PLT and does not necessarily
outperform IT. Communicating the averaging window length or adopting an asymmetric average inflation target that judges below-target average inflation more negatively avoids these pitfalls.
Further Events:
https://www.tuwien.at/en/mg/econ/events
Best,
Julia Hutter for
Alexia Fuernkranz-Prskawetz
Julia Hutter
TU Wien
Institute of Statistics and Mathematical Methods in Economics
Research Group Economics
Phone: +43 1 58801 10531
Mail:
julia.hutter@tuwien.ac.at