Reminder:

Please note, that this talk will start at 4:00 pm!

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Dear all,

we would like to invite you to our next ECON Theory and Policy Seminar talk:

Thu, March 3, 4:00 pm (online via Zoom)

https://tuwien.zoom.us/j/95006905406?pwd=MDVXR1dhdXpwMmNMNHlSTGdUbC9FQT09

Average Inflation Targeting and the Interest Rate Lower Bound
Flora Budianto (BIS) https://sites.google.com/site/florabudianto/home

Specifying the central bank's inflation target in terms of an average inflation rate - rather than a period-by-period inflation rate - increases welfare in a New Keynesian model with an occasionally binding lower bound on nominal interest rates. Under rational expectations, the welfare-maximizing averaging window is infinitely long, which means that optimal average inflation targeting (AIT) is equivalent to price level targeting (PLT). However, AIT with a finite, but sufficiently long, averaging window can attain most of the welfare gain from PLT. Under boundedly-rational expectations, if cognitive limitations are sufficiently strong, the optimal averaging window is finite, and the welfare gain of adopting AIT can be small.

Further Events: https://www.econ.tuwien.ac.at/index.html#events

Best regards,

Julia Hutter for

Alexia Fürnkranz-Prskawetz

Julia Hutter

TU Wien

Institute of Statistics and Mathematical Methods in Economics

Economics E105-3

Phone: +43-1-58801x10531

E-Mail: julia.hutter@tuwien.ac.at