Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/170689 
Year of Publication: 
2017
Series/Report no.: 
Bundesbank Discussion Paper No. 29/2017
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
Time-variation in disagreement about inflation expectations is a stylized fact in surveys, but little is known on how disagreement interacts with the efficacy of monetary policy. This paper fills this gap in providing theoretical predictions of monetary policy shocks for different levels of disagreement and testing these empirically. When disagreement is high, a dispersed information New Keynesian model predicts that a contractionary monetary policy shock leads to a short-run rise in inflation and inflation expectations, whereas both decline when disagreement is low. Estimating a smooth-transition model on U.S. data shows significantly different responses in inflation and inflation expectations consistent with theory.
Subjects: 
disagreement
dispersed information
disanchoring of inflation expectations
monetary policy transmission
state-dependent effects of monetary policy
local projections
JEL: 
C52
D83
E31
E32
E52
ISBN: 
978-3-95729-399-2
Document Type: 
Working Paper

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