A Quantitative Exploration of the Opportunistic Approach to Disinflation

By Yunus Aksoy, Athanasios Orphanides, David H. Small, Volker Wieland, David W. Wilcox. Social Science Research Network, 2006

138 citations recorded by the source corpus.

Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under “the opportunistic approach to disinflation” a central bank controls inflation aggressively when inflation is far from its target, but concentrates more on output stabilization when inflation is close to its target, allowing supply shocks and unforeseen fluctuations in aggregate demand to move inflation within a certain band. We use stochastic simulations of a small-scale rational expectations model to contrast the behavior of output and inflation under opportunistic and linear rules.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/2b9698a3b7e9610e83d190c5b766dc748b969bdc

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In Economics and Econometrics

Citations in the corpus

Opportunistic and deliberate disinflation under imperfect credibility (2000, background): “For example, see Orphanides and Wilcox (1996), Rudebusch (1996), Meyer (1997), and Orphanides et al. (1997).”
Monetary policy evaluation with noisy information (2003, unknown): “(See, e.g. Henderson and McKibbin, 1993; Levin, 1996; Ball, 1997; Orphanides et al, 1997; and the collection of studies in Taylor, 1998b.) As Taylor (1998a) observes in surveying this work, the simulation analysis has already produced a number of positive conclusions.”