Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154427
Authors: 
Busetti, Fabio
Delle Monache, Davide
Gerali, Andrea
Locarno, Alberto
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 1994
Abstract: 
The paper studies how a prolonged period of subdued price developments may induce a de-anchoring of inflation expectations from the central bank's objective. This is shown within a framework where agents form expectations using adaptive learning, choosing among a set of alternative forecasting models. The analysis is accompanied by empirical evidence on the properties of inflation expectations in the euro area. Our results also suggest that monetary policy may lose effectiveness if delayed too much, as expectations are allowed to drift away from target for too long.
Subjects: 
DSGE
expectations de-anchoring
inflation
learning
JEL: 
E31
E37
E58
D83
Document Type: 
Working Paper

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