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240607 ||| eng |
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|a 9798400269097
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|a Hakamada, Mai
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|a The Consequences of Falling Behind the Curve: Inflation Shocks and Policy Delays Under Rational and Behavioral Expectations
|c Mai Hakamada, Carl Walsh
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| 260 |
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|a Washington, D.C.
|b International Monetary Fund
|c 2024
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| 300 |
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|a 52 pages
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| 653 |
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|a Interest rates
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| 653 |
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|a Credit
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| 653 |
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|a Rational expectations
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| 653 |
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|a Finance
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| 653 |
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|a Financial services
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| 653 |
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|a Deflation
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| 653 |
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|a Expectations
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| 653 |
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|a Production
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| 653 |
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|a Production; Economic theory
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| 653 |
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|a Economics of specific sectors
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| 653 |
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|a Macroeconomics: Production
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| 653 |
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|a Currency crises
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| 653 |
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|a Policy Objectives
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| 653 |
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|a Policy Coordination
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| 653 |
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|a Rational expectations; Economic theory
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| 653 |
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|a Macroeconomics
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| 653 |
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|a Banking
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| 653 |
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|a Economic theory
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| 653 |
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|a Money Multipliers
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| 653 |
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|a Speculations
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| 653 |
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|a Economic & financial crises & disasters
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| 653 |
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|a Inflation
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| 653 |
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|a Economic Theory
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| 653 |
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|a Output gap
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| 653 |
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|a Policy Designs and Consistency
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| 653 |
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|a Real interest rates
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| 653 |
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|a Economics: General
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| 653 |
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|a Informal sector; Economics
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| 653 |
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|a Economic theory & philosophy
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| 653 |
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|a Price Level
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| 653 |
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|a Banks and Banking
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| 653 |
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|a Money Supply
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| 653 |
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|a Prices
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| 653 |
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|a Central Banks and Their Policies
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| 653 |
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|a Interest Rates: Determination, Term Structure, and Effects
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| 653 |
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|a Monetary Policy
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| 653 |
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|a Production and Operations Management
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| 653 |
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|a Central bank policy rate
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| 700 |
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|a Walsh, Carl
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| 041 |
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|a eng
|2 ISO 639-2
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| 989 |
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|b IMF
|a International Monetary Fund
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| 490 |
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|a IMF Working Papers
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| 028 |
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|a 10.5089/9798400269097.001
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| 856 |
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|u https://elibrary.imf.org/view/journals/001/2024/042/001.2024.issue-042-en.xml?cid=545507-com-dsp-marc
|x Verlag
|3 Volltext
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|a 330
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|a Central banks in major industrialized economies were slow to react to the surge in inflation that began in early 2021. The proximate causes of this surge were the supply chain disruptions associated with the easing of COVID restrictions, fiscal policies designed to cushion the economic impact of COVID, and the impact on commodity prices and supply chains of the war in Ukraine. We investigate the consequences of policy delay in responding to inflation shocks. First, using a simple three-period model, we show how policy delay worsens inflation outcomes, but can mitigate or even reverse the output decline that occurs when policy responds without delay. Then, using a calibrated new Keynesian framework and two measures of loss that incorporate a “balanced approach” to weigh inflation and the output gap, we find that loss is monotonically increasing in the length of the delay. Loss is reduced if policy, when it does react, is more aggressive. To investigate whether these results are sensitive to the assumption of rational expectations, we consider cognitive discounting as an alternative assumption about expectations. With cognitive discounting, forward guidance is less powerful and results in a reduction in the costs of delay. Under either assumption about expectations, the costs of a short delay can be eliminated by adopting a less inertial policy rule and a more aggressive response to inflation
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