Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154249
Authors: 
Schmidt, Sebastian
Nakata, Taisuke
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper 1816
Abstract: 
In an economy with an occasionally binding zero lower bound (ZLB) constraint, the anticipation of future ZLB episodes creates a trade-off for discretionary central banks between inflation and output stabilization. As a consequence, inflation systematically falls below target even when the policy rate is above zero. Appointing Rogoff’s (1985) conservative central banker mitigates this deflationary bias away from the ZLB and enhances welfare by improving allocations both at and away from the ZLB.
Subjects: 
Deflationary Bias
Inflation Conservatism
Inflation Targeting
Liquidity Traps
zero lower bound
JEL: 
E52
E61
ISBN: 
978-92-899-1629-5
Document Type: 
Working Paper

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