NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Matthias Rottner

European University Institute
Department of Economics
Villa La Fonte
Via delle Fontanelle 18
San Domenico di Fiesole
Italy

E-Mail: matthias.rottner@eui.eu
Institutional Affiliation: European University Institute

NBER Working Papers and Publications

September 2019Hitting the Elusive Inflation Target
with Francesco Bianchi, Leonardo Melosi: w26279
Since the 2001 recession, average core inflation has been below the Federal Reserve’s 2% target. This deflationary bias is a predictable consequence of a low nominal interest rates environment in which the central bank follows a symmetric strategy to stabilize inflation. The deflationary bias increases if macroeconomic uncertainty rises or the natural real interest rate falls. An asymmetric rule according to which the central bank responds less aggressively to above-target inflation corrects the bias and allows inflation to converge to the central bank’s target. We show that adopting this asymmetric rule improves welfare and reduces the risk of self-fulfilling deflationary spirals. This approach does not entail any history dependence in setting the policy rate or any commitment to overshoo...
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us