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Dampened expectations in the Phillips Curve: a note

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  • Dennery, Charles

Abstract

Dampened inflation expectations have a significant impact on the New Keynesian Phillips Curve. This dampening not only flattens the long run Phillips Curve, but it can also lead to a bias in the estimation of its short run slope. It also affects the response of a small NK model to demand shocks, and affects the optimal monetary policy: in particular, the price targeting result of the Ramsey policy is violated when there is dampening.

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  • Dennery, Charles, 2019. "Dampened expectations in the Phillips Curve: a note," MPRA Paper 98189, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98189
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    References listed on IDEAS

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    1. Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2008. "Monetary Policy and Business Cycles with Endogenous Entry and Product Variety," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 299-353, National Bureau of Economic Research, Inc.
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    6. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework," Introductory Chapters, in: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press.
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    Cited by:

    1. Aquino, Juan, 2019. "The Small Open Economy New-Keynesian Phillips Curve: Specification, Structural Breaks and Robustness," Working Papers 2019-019, Banco Central de Reserva del Perú.

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    More about this item

    Keywords

    Anchored expectations; Phillips Curve; Ramsey policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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