Monetary Policy, Trend Inflation, and Unemployment Volatility

2018 ◽  
Vol 50 (4) ◽  
pp. 637-673 ◽  
Author(s):  
SERGIO A. LAGO ALVES
Keyword(s):  
Monetary Policy ◽  
Trend Inflation ◽  
Policy Trend ◽  
Unemployment Volatility

TREND INFLATION AND MONETARY POLICY IN EASTERN EUROPE

2017 ◽  
Vol 23 (4) ◽  
pp. 1649-1663
Author(s):  
Monika Junicke
Keyword(s):  
Monetary Policy ◽  
Transition Economies ◽  
Inflation Targeting ◽  
Price Index ◽  
Consumer Price Index ◽  
Producer Price ◽  
Trend Inflation ◽  
Theoretical Predictions ◽  
Dynamic Stochastic ◽  
Eastern European Countries

I use a two-country dynamic stochastic general equilibrium (DSGE) model with a nonzero steady-state inflation to study monetary policy in transition economies. In particular, my analysis focuses on whether inflation targeting is based on a consumer price index (CPI) or its producer counterpart, producer price index (PPI). This issue is specifically relevant for transition economies as they might be subject to Balassa–Samuelson effects arising from trading in international markets. Under these circumstances, domestic inflation is possibly higher than imported inflation, hence targeting PPI inflation may prove more effective in influencing domestic macroeconomic variables than targeting CPI inflation. Using a Bayesian methodology, I find that the central banks of three Eastern European countries (namely, the Czech Republic, Hungary, and Poland) are likely to target PPI inflation rather than CPI inflation. This result is in line with the theoretical predictions in the literature, and is robust across several Taylor-type rules.

scholarly journals Rules-based monetary policy and the threat of indeterminacy when trend inflation is low

2020 ◽  
Vol 114 ◽  
pp. 317-333 ◽  
Author(s):  
Hashmat Khan ◽  
Louis Phaneuf ◽  
Jean Gardy Victor
Keyword(s):  
Monetary Policy ◽  
Trend Inflation
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