Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287824 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Money, Credit and Banking [ISSN:] 1538-4616 [Volume:] 54 [Issue:] 8 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2021 [Pages:] 2477-2517
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
It is widely believed that inflation inertia varies with the policy pursued. In a novel experiment, price setters determine inflation rates and react to a central bank's indicator, which is implemented exogenously either as cold turkey or gradual disinflation. In a third treatment, subjects in the role of a central banker set the indicator endogenously, potentially reducing inertia by signaling to be a tough central banker. I find inertia to be structurally stable and invariant to policies. The data can be organized by a model of level‐k$k$ thinking, which shows that cold turkey improves only a few subjects' adjustment while leaving many behind.
Subjects: 
cold turkey
disinflation
gradualism
inflation inertia
level‐k
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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