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ResearchPaper
2009
Deflationary vs. inflationary expectations : a new-Keynesian perspective with heterogeneous agents and monetary believes
Deflationary vs. inflationary expectations : a new-Keynesian perspective with heterogeneous agents and monetary believes
Abstract (English)
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.
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Publication series
Hohenheimer Diskussionsbeiträge; 312
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Faculty
Faculty of Business, Economics and Social Sciences
Institute
Institut für Volkswirtschaftslehre (bis 2010)
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Language
English
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Classification (DDC)
330 Economics
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BibTeX
@techreport{Sauter2009,
url = {https://hohpublica.uni-hohenheim.de/handle/123456789/5259},
author = {Sauter, Oliver and Geiger, Felix},
title = {Deflationary vs. inflationary expectations : a new-Keynesian perspective with heterogeneous agents and monetary believes},
year = {2009},
school = {Universität Hohenheim},
series = {Hohenheimer Diskussionsbeiträge},
}