English, Article, Journal or magazine article edition: Deflationary vs. Inflationary Expectations - A New-Keynesian Perspective with Heterogeneous Agents and Monetary Believes Felix Geiger; Oliver Sauter

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Deflationary vs. Inflationary Expectations - A New-Keynesian Perspective with Heterogeneous Agents and Monetary Believes
Author
  • Felix Geiger
  • Oliver Sauter
Physical Description
  • preprint
Notes
  • We expand a standard New-Keynesian model by allowing for a special role of money in the inflation and expectations building process. Motivated by the two-pillar Phillips curve, we introduce heterogeneous expectations. Thereby a fraction of agents forms inflation expectations by observing trend money growth. We show that in the presence of these monetary believers, contractive shocks to the economy produce smoother dynamics for inflation and output. We also find that monetary policy should follow a conventional Taylor rule with contemporaneous inflation and output data, if it is uncertain about the fraction of monetary believers.
  • New-Keynesian model, monetary policy, two-pillar Phillips curve, heterogeneous expectations, monetary believes
  • RePEc:hoh:hohdip:312
Language
  • English
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