Haku
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Price level targeting with evolving credibility
(23.02.2018)
Bank of Finland Research Discussion Papers 5/2018
Bank of Finland Research Discussion Papers 5/2018
We examine global dynamics under learning in a nonlinear New Keynesian model when monetary policy uses price-level targeting and compare it to inflation targeting. Domain of attraction of the targeted steady state gives a ...
Extreme events and optimal monetary policy
(06.02.2018)
Bank of Finland Research Discussion Papers 4/2018
Bank of Finland Research Discussion Papers 4/2018
This paper studies the implication of extreme shocks for monetary policy. The analysis is based on a small-scale New Keynesian model with sticky prices and wages where shocks are drawn from asymmetric Generalized Extreme ...
Comparing inflation and price level targeting: the role of forward guidance and transparency
(07.04.2015)
Bank of Finland Research Discussion Papers 9/2015
Bank of Finland Research Discussion Papers 9/2015
We examine global dynamics under learning in New Keynesian models with price level targeting that is subject to the zero lower bound. The role of forward guidance is analyzed under transparency about the policy rule. ...
Optimal monetary policy under bounded rationality
(19.04.2018)
Bank of Finland Research Discussion Papers 9/2018
Bank of Finland Research Discussion Papers 9/2018
Optimal monetary policy under discretion, commitment, and optimal simple rules regimes is analyzed through a behavioral New Keynesian model. Flexible price level targeting dominates under discretion; flexible inflation ...
Revisiting intertemporal elasticity of substitution in a sticky price model
(09.06.2021)
Bank of Finland Research Discussion Papers 9/2021
Bank of Finland Research Discussion Papers 9/2021
Macroeconomic models typically assume additively separable preferences where consumption enters the utility function in a logarithmic form. This restriction implies that consumption growth is highly sensitive to movements ...
Determinacy and E-stability with interest rate rules at the zero lower bound
(15.11.2021)
Bank of Finland Research Discussion Papers 14/2021
Bank of Finland Research Discussion Papers 14/2021
We evaluate and compare alternative monetary policy rules, namely average inflation targeting, price level targeting, and traditional inflation targeting rules, in a standard New Keynesian model that features recurring, ...
The power of forward guidance and the fiscal theory of the price level
(29.10.2018)
Bank of Finland Research Discussion Papers 21/2018
Bank of Finland Research Discussion Papers 21/2018
Standard New Keynesian models predict implausibly large and favorable responses of inflation and output to expansionary forward guidance on interest rates. We find that the introduction of permanent or recurring active ...
Do we really know that U.S. monetary policy was destabilizing in the 1970s?
(11.09.2019)
Bank of Finland Research Discussion Papers 20/2019
Bank of Finland Research Discussion Papers 20/2019
The paper re-examines whether the Federal Reserve’s monetary policy was a source of instability during the Great Inflation by estimating a sticky-price model with positive trend inflation, commodity price shocks and sluggish ...
What does “below, but close to, two percent” mean? Assessing the ECB’s reaction function with real time data
(05.10.2017)
Bank of Finland Research Discussion Papers 29/2017
Bank of Finland Research Discussion Papers 29/2017
We estimate the ECB’s monetary policy reaction function by using real time Eurosystem/ECB staff macroeconomic projection data, which are presented to the ECB’s Governing Council when it assesses the monetary policy stance ...
Demographic aging and the New Keynesian Phillips Curve
(26.10.2023)
Bank of Finland Research Discussion Papers 16/2023
Bank of Finland Research Discussion Papers 16/2023
I document a statistical link between old-age dependency ratios and average markups. I propose that a mechanism whereby households develop deep habits in consumption as they age could explain this feature of the data. I ...