On the perils of stabilizing prices when agents are learning

• 成果类型: Article
• 署名作者: Mele, Antonio; Molnar, Krisztina; Santoro, Sergio
• 署名单位: University of Surrey; Norwegian School of Economics (NHH); European Central Bank; Bank of Italy
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2019.08.006
• 发表日期: 2020
• 页码: 339-353
• 关键词: Optimal monetary policy; Price level stabilization; Inflation stabilization; learning

摘要

The main advantage of price level stabilization compared with inflation stabilization rests on the central bank's ability to shape expectations. We show that stabilizing prices is no longer optimal when the central bank can shape expectations of agents with incomplete knowledge, who have to learn about the policy implemented. Disinflating in the short run more than agents expect generates short-term gains without triggering an abrupt loss of confidence, because agents update expectations sluggishly. Following this policy, in the long run, the central bank loses the ability to shape agents' beliefs, and the economy converges to a rational expectations equilibrium in which policy does not stabilize prices, economic volatility is high, and agents suffer the corresponding welfare losses. However, these losses are outweighed by short-term gains from the learning phase. (c) 2019 Elsevier B.V. All rights reserved.