Opportunistic and deliberate disinflation under imperfect credibility

By Antulio N. Bomfim, Glenn D. Rudebusch. 2000

174 citations recorded by the source corpus.

One strategy for disinflation prescribes a deliberate path towards low inflation. A contrasting opportunistic approach eschews deliberate action and instead waits for unforeseen shocks to reduce inflation. This paper compares the ability of these two approaches to achieve disinflation---and at what cost. We analyze these issues using the Federal Reserve's FRB/US model, which allows alternative assumptions to be made about expectations held by agents in the economy; hence, the credibility of the central bank can be considered in assessing the cost of deliberate and opportunistic disinflations.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/bec36b5a4be5e86a929970da7b0b2681da3a16de

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Citations in the corpus

Monetary Policy Inertia: Fact or Fiction? (2006, unknown): “medium-term inflation target (as in Bomfim and Rudebusch 2000 ) with associated underlying inflation expectations over the next two to five years.”
Anchored Inflation Expectations (2020, unknown): “(32)See also Lansing (2009); Hommes and Lustenhouwer (2015) for a model of central bank credibility with heterogeneous expectations; and Bomfim and Rudebusch (2000) and Gibbs and Kulish (2015) for explorations of the role of anchored expectations in the costs of disinflation.”
A MACRO-FINANCE MODEL OF THE TERM STRUCTURE, MONETARY POLICY AND THE ECONOMY* (2003, background): “) Still, a large number of recent empirical studies of central bank behavior have employed some variant of the Taylor (1993) rule to estimate a useful approximation to the monetary policy reaction function.(5) One version of the Taylor rule can be written as”
Anchoring of Inflation Expectations in the Euro Area: Recent Evidence Based on Survey Data (2016, unknown): “Then we use the Bomfim and Rudebusch (2000) method to analyse the anchoring of long-term inflation expectations to the ECB inflation target and extend this method to describe the behaviour of short- and medium-term inflation expectations.3 The novelty of our approach is in assessing the…”