Cookies?
Library Header Image
LSE Research Online LSE Library Services

Uncertainty about perceived inflation target and monetary policy

Aoki, Kosuke and Kimura, Takeshi (2007) Uncertainty about perceived inflation target and monetary policy. 07-E-16. Bank of Japan, Tokyo, Japan. (Unpublished)

Full text not available from this repository.
Identification Number: 07-E-16

Abstract

We analyse the interaction between private agents’ uncertainty about inflation target and the central bank’s data uncertainty. In our model, private agents update their perceived inflation target and the central bank estimates unobservable economic shocks as well as the perceived inflation target. Under those two uncertainties, the learning process of both private agents and the central bank causes higher order beliefs to become relevant, and this mechanism is capable of generating high persistence and volatility of inflation even though the underlying shocks are purely transitory. We also find that the persistence and volatility become smaller as the inflation target becomes more credible, that is, the private agents’ uncertainty about inflation target (and hence the bank’s data uncertainty) diminishes.

Item Type: Monograph (Working Paper)
Official URL: http://www.boj.or.jp/en/type/ronbun/ron/wps/index....
Additional Information: © 2007 Kosuke Aoki and Takeshi Kimura
Subjects: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Departments > Economics
Date Deposited: 30 Jan 2008
Last Modified: 01 Oct 2010 08:49
URI: http://eprints.lse.ac.uk/id/eprint/3169

Actions (login required)

View Item View Item