L. Gobbi, R. Tamborini

Mercoledì, 27 novembre - ore 15:00 - Aula 3F (DEM)

Abstract

When inflation picks up, central banks fear that de-anchored expectations trigger ever increasing inflation. However, such scenario does not materialize in the standard New Keynesian (NK) blueprint for central banks. First, we show that divergent inflation processes obtain by introducing beliefs about future inflation that de-anchor endogenously, together with indexed wages and persistent shocks. Second, however, our simulations of the model with consensus values of the relevant parameters show that this result is unlikely. Either the concern with the de-anchoring of inflation expectations is overrated or it should be given different theoretical underpinnings than the NK ones.