Policy uncertainty can magnify cost shocks – BoI paper
Lack of clarity over inflation targets increases effects of cost-push shocks on output, researchers say
A working paper published by the Bank of Italy studies the interaction of cost‐push shocks with monetary policy.
In Disinflationary shocks and inflation target uncertainty, Stefano Neri and Tiziano Ropele note that in New Keynesian models, favourable cost-push shocks lower inflation and increase output. But if a central bank does not target inflation perfectly, such shocks can become contractionary.
The authors present a small-scale New Keynesian model of the economy. Their model includes a
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe
You are currently unable to print this content. Please contact info@centralbanking.com to find out more.
You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@centralbanking.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@centralbanking.com
More on Economics
Rate hikes affect manufacturing economies more – Fed study
Authors find similar effects across eurozone and in US at county level
Canada’s GDP revisions ‘raise questions over monetary policy’
However, experts disagree on whether central bank’s modelling was flawed and if it cut rates too quickly
Two-thirds of central banks forecast policy rate in main models
But relatively few make their rate forecasts public
Economists’ median salary falls below $30,000 a year
Annual budget of economics departments averages under $1 million
Policy economists outnumber research colleagues
Economics FTE staff make up 4% of central banks’ overall employees, on average
The past and future of BIS economics
Claudio Borio looks back over 37 years at the BIS and Hyun Song Shin looks to the future
Economics teams tend to be tailored by institution
But hub and spoke model is prevalent among high income respondents
Bailey: UK must stay open for business
BoE governor calls for bridges to be built with EU countries and others