Disagreement over inflation expectations weakens monetary policy – Bundesbank paper
Research uses data from Fed’s survey of professional forecasters from 1968 to 2017
Empirical data from the US show that monetary policy is weakened if there is a high level of disagreement about the future course of inflation, a discussion paper published by the Deutsche Bundesbank argues.
In “Disagreement and monetary policy”, Elisabeth Falck, Mathias Hoffmann and Patrick Hürtgen say that New Keynesian dispersed-information models predict this result. They test this hypothesis by estimating the state-dependent effects of monetary policy for different levels of disagreement
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