Asymmetric inflation targets improve welfare – Chicago Fed paper
Fed can remove deflationary bias by adopting asymmetric target, model suggests
Asymmetric inflation targets generate greater welfare gains than symmetric targets and reduce the risk of a deflationary spiral, a paper published by the Federal Reserve Bank of Chicago finds.
In the paper, Francesco Bianchi, Leonardo Melosi and Matthias Rottner examine the welfare effects of an inflation target that responds less aggressively when inflation is above target than when it is below target.
They argue the Fed’s symmetric approach to inflation targeting when long-run nominal
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