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Author Armenter, Roc
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword Sustainable Monetary Policy Inflation Expectation ♦ Asset Price System ♦ Many Sustainable Inflation Path ♦ Infinite Horizon Version ♦ Short-term Nominal Bond ♦ Sustainable Policy ♦ Certain Discount Rate ♦ Short-term Nominal Interest Rate ♦ Barro-gordon Model ♦ Equilibrium Reputation ♦ Asset Price ♦ Low Inflation ♦ Nominal Asset Market ♦ Private-sector Expectation ♦ Sustainable Inflation Path ♦ Policy Framework
Abstract I show that the short-term nominal interest rate can anchor private-sector expectations into low inflation—more precisely, into the best equilibrium reputation can sustain. I introduce nominal asset markets in an infinite horizon version of the Barro-Gordon model. I then analyze the subset of sustainable policies compatible with any given asset price system at date t = 0. While there are usually many sustainable inflation paths associated with a given set of asset prices, the best sustainable inflation path is implemented if and only if the short-term nominal bond is priced at a certain discount rate. My results suggest that policy frameworks must also be evaluated on their ability to coordinate expectations. 1
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Publisher Date 2010-01-01