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dc.contributor.authorTesfaselassie, Mewael F.en_US
dc.contributor.authorSchaling, Ericen_US
dc.date.accessioned2009-01-28T14:18:30Z-
dc.date.available2009-01-28T14:18:30Z-
dc.date.issued2008en_US
dc.identifier.citationKiel working paper Institut für Weltwirtschaft, Kiel 1429en_US
dc.identifier.urihttp://hdl.handle.net/10419/4314-
dc.description.abstractIn this paper we analyze disinflation policy when a central bank has imperfect information about private sector inflation expectations but learns about them from economic outcomes, which are in part the result of the disinflation policy. The form of uncertainty is manifested as uncertainty about the effect of past disinflation policy on current output gap. Thus current as well as past policy actions matter for output gap determination. We derive the optimal policy under learning (DOP) and compare it two limiting cases---certainty equivalence policy (CEP) and cautionary policy (CP). It turns out that under the DOP inflation stay between the levels implied by the CEP and the CP. A novel result is that this holds irrespective of the initial level of inflation. Moreover, while at high levels of inherited inflation the DOP moves closer to the CEP, at low levels of inherited inflation the DOP resembles the CP.en_US
dc.description.abstractIn this paper we analyze disinflation policy when a central bank has imperfect information about private sector inflation expectations but learns about them from economic outcomes, which are in part the result of the disinflation policy. The form of uncertainty is manifested as uncertainty about the effect of past disinflation policy on current output gap. Thus current as well as past policy actions matter for output gap determination. We derive the optimal policy under learning (DOP) and compare it two limiting cases---certainty equivalence policy (CEP) and cautionary policy (CP). It turns out that under the DOP inflation stay between the levels implied by the CEP and the CP. A novel result is that this holds irrespective of the initial level of inflation. Moreover, while at high levels of inherited inflation the DOP moves closer to the CEP, at low levels of inherited inflation the DOP resembles the CP. -- Learning ; inflation expectations ; disinflation policy ; separation principle ; Kalman filter ; optimal controlen_US
dc.language.isoengen_US
dc.publisherKiel Institute for the World Economy (IfW) Kielen_US
dc.relation.ispartofseriesKieler Arbeitspapiere 1429en_US
dc.subject.jelE52en_US
dc.subject.jelF33en_US
dc.subject.jelC53en_US
dc.subject.jelE43en_US
dc.subject.jelC53en_US
dc.subject.ddc330-
dc.subject.keywordLearning , Inflation Expectations , Disinflation Policy , Separation Principle , Kalman Filter , Optimal Controlen_US
dc.subject.stwInflationsbekämpfungen_US
dc.subject.stwEntscheidung bei Unsicherheiten_US
dc.subject.stwInflationserwartungen_US
dc.subject.stwLernprozessen_US
dc.subject.stwKontrolltheorieen_US
dc.subject.stwZustandsraummodellen_US
dc.subject.stwTheorieen_US
dc.titleManaging disinflation under uncertaintyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn571070957en_US
dc.identifier.ppn571070957en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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