Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25459
Authors: 
Aksoy, Yunus
Orphanides, Athanasios
Small, David
Wieland, Volker
Year of Publication: 
2005
Series/Report no.: 
CFS Working Paper 2005/19
Abstract: 
Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under 'the opportunistic approach to disinflation' a central bank controls inflation aggressively when inflation is far from its target, but concentrates more on output stabilization when inflation is close to its target, allowing supply shocks and unforeseen fluctuations in aggregate demand to move inflation within a certain band. We use stochastic simulations of a smallscale rational expectations model to contrast the behavior of output and inflation under opportunistic and linear rules.
Subjects: 
Inflation targeting
monetary policy
interest rates
policy rules
disinflation
JEL: 
E31
E52
E58
E61
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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