Inflation targeting and liquidity traps under endogenous credibility / by Cars Hommes and Joep Lustenhouwer. : FB3-5/2019-9E-PDF

"Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations. We find that the region of allowed policy parameters is strictly larger than under rational expectations. However, when the zero lower bound on the nominal interest rate is accounted for, self-fulfilling deflationary spirals can occur, depending on the credibility of the central bank. Deflationary spirals can be prevented with a high inflation target and aggressive monetary easing"--Abstract, page ii.

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Renseignements sur la publication
Ministère/Organisme Bank of Canada.
Titre Inflation targeting and liquidity traps under endogenous credibility / by Cars Hommes and Joep Lustenhouwer.
Titre de la série Bank of Canada staff working paper, 1701-9397 ; 2019-9
Type de publication Série - Voir l'enregistrement principal
Langue [Anglais]
Format Électronique
Document électronique
Note(s) "February 2019."
Includes bibliographical references.
Includes abstract in French.
Information sur la publication Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2019.
©2019
Auteur / Contributeur Hommes, Carsien Harm, author.
Lustenhouwer, Joep‏, author.
Description 1 online resource (ii, 35 pages) : graphs.
Numéro de catalogue
  • FB3-5/2019-9E-PDF
Descripteurs Monetary policy
Inflation
Interest rates
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