Aoki, Kosuke and Kimura, Takeshi (2007) Uncertainty about perceived inflation target and monetary policy. . Bank of Japan, Tokyo, Japan.
Full text not available from this repository.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 |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 30 Jan 2008 |
| Last Modified: | 11 Dec 2024 18:50 |
| URI: | http://eprints.lse.ac.uk/id/eprint/3169 |
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