Siddhartha Chattopadhyay
IIT Kharagpur
Abstract:
We propose that, the monetary authority adopt the inflation target as a time varying policy instrument at the zero lower bound (ZLB) with the same zeal with which they have adopted a fixed inflation target away from the ZLB. Specifically, after an extreme adverse shock reduces demand, the monetary authority promises future inflation by raising the inflation target in the Taylor Rule and announcing its persistence over time. The loss under our proposed policy is very similar to that under optimal monetary policy with the advantage that it is communicable using the language of the inflation target and implementable using the Taylor Rule. We also show that the inflation target and its persistence could be raised high enough to keep the economy away from the ZLB, but welfare costs are large.
Date: June 11, 2014
Time: 04:00 P.M.
Venue:
Conference Hall (Classroom), Ground Floor, R&T Building
National Institute of Public Finance and Policy,
18/2 Satsang Vihar Marg, Special Institutional Area,
New Delhi-110067(INDIA)
Location:
View Larger Map
Note:
Those who are interested may please confirm your participation to Ms. Suhasini Prasad at suhasini.prasad@nipfp.org.in latest by Tuesday, 10th June 2014
IIT Kharagpur
Abstract:
We propose that, the monetary authority adopt the inflation target as a time varying policy instrument at the zero lower bound (ZLB) with the same zeal with which they have adopted a fixed inflation target away from the ZLB. Specifically, after an extreme adverse shock reduces demand, the monetary authority promises future inflation by raising the inflation target in the Taylor Rule and announcing its persistence over time. The loss under our proposed policy is very similar to that under optimal monetary policy with the advantage that it is communicable using the language of the inflation target and implementable using the Taylor Rule. We also show that the inflation target and its persistence could be raised high enough to keep the economy away from the ZLB, but welfare costs are large.
Date: June 11, 2014
Time: 04:00 P.M.
Venue:
Conference Hall (Classroom), Ground Floor, R&T Building
National Institute of Public Finance and Policy,
18/2 Satsang Vihar Marg, Special Institutional Area,
New Delhi-110067(INDIA)
Location:
View Larger Map
Note:
Those who are interested may please confirm your participation to Ms. Suhasini Prasad at suhasini.prasad@nipfp.org.in latest by Tuesday, 10th June 2014
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