FRINK Linked Data Fragments server

Matches in SemOpenAlex for { <https://semopenalex.org/work/W3123604264> ?p ?o ?g. }

• W3123604264 abstract "A prolonged period of extremely low nominal interest rates has not resulted in high inflation. This has led to increased interest in the “Neo‐Fisherian proposition according to which low nominal interest rates may themselves cause inflation to be lower. The fact that standard models of the effects of monetary policy have the property that perfect foresight equilibria in which the nominal interest rate remains low forever necessarily involve low inflation (at least eventually) might seem to support such a view. Here, however, we argue that such a conclusion depends on a misunderstanding of the circumstances under which it makes sense to predict the effects of a monetary policy commitment by calculating the perfect foresight equilibrium consistent with the policy. We propose an explicit cognitive process by which agents may form their expectations of future endogenous variables. Under some circumstances, such as a commitment to follow a Taylor rule, a perfect foresight equilibrium (PFE) can arise as a limiting case of our more general concept of reflective equilibrium, when the process of reflection is pursued sufficiently far. But we show that an announced intention to fix the nominal interest rate for a long enough period of time creates a situation in which reflective equilibrium need not resemble any PFE. In our view, this makes PFE predictions not plausible outcomes in the case of policies of the latter sort. According to the alternative approach that we recommend, a commitment to maintain a low nominal interest rate for longer should always be expansionary and inflationary, rather than causing deflation; but the effects of such “forward guidance are likely, in the case of a long‐horizon commitment, to be much less expansionary or inflationary than the usual PFE analysis would imply. JEL Classification: E31, E43 and E52 Mariana Garcia‐Schmidt mcg2155@columbia.edu Columbia University Michael Woodford mw2230@columbia.edu Columbia University and CEPR † We would like to thank Gauti Eggertsson, Jamie McAndrews, Rosemarie Nagel, Jon Steinsson and Lars Svensson for helpful comments, and the Institute for New Economic Thinking for research support. 1 Perfect-Foresight Analyses of the Effects of Forward Guidance: A Paradox One of the more notable features of recent monetary experience has been the fact that first Japan, and now more recently the U.S. as well, have gone through prolonged periods of extremely low nominal interest rates (overnight interest rates reduced practically to zero and kept there for years) without this leading to the sort of inflationary spiral that one might have expected to follow from such a reckless experiment. Instead, inflation has remained low, below both countries’ desired levels of inflation (and even below zero, much of the time, in Japan), while real activity has remained disappointing as well. A common reaction to these surprising developments has been to conclude that financial crises of the kind that both countries experienced can lower the equilibrium real rate of interest for a very prolonged period of time, so that real interest rates that seem very low by historical standards may nonetheless continue to be contractionary. But some have proposed an alternative interpretation of these experiences, according to which low nominal interest rates themselves may cause inflation to be lower. In this view, the monetary policy reactions to these crises may have actually prolonged the disinflationary slumps by creating disinflationary expectations. Under such a view, actually promising to keep interest rates low for a longer period than would otherwise have been expected — as both the Fed and a number of other central banks have done in the recent period — would be the worst possible policy for a central bank worried that inflation will continue to run below its target, and some (beginning with Bullard, 2010, and Schmitt-Grohe and Uribe, 2010) have proposed that such a central bank should actually raise interest rates in order to head off the possibility of a deflationary trap. As the period over which the U.S. has kept its federal funds rate target near zero has continued, views of this kind, that some have taken to calling “neo-Fisherian,” have gained increasing currency, at least on the internet. Moreover, it might seem that even a standard textbook model of the effects of alternative monetary policy commitments would support the “neo-Fisherian” position. The most straightforward theoretical argument proceeds in two steps. One See, for example, Woodford (2012) for a discussion of these experiences. See, for example, Cochrane (2015b) for discussion and additional references. The argument is explained more formally in section 2.2 below." @default.
• W3123604264 created "2021-02-01" @default.
• W3123604264 creator A5004953557 @default.
• W3123604264 creator A5028984462 @default.
• W3123604264 creator A5070476778 @default.
• W3123604264 date "2015-01-01" @default.
• W3123604264 modified "2023-09-26" @default.
• W3123604264 title "ARE LOW INTEREST RATES DEFLATIONARY? A PARADOX OF PERFECT-FORESIGHT ANALYSIS†" @default.
• W3123604264 cites W1482487609 @default.
• W3123604264 cites W1584269235 @default.
• W3123604264 cites W1590276698 @default.
• W3123604264 cites W1601323520 @default.
• W3123604264 cites W1608056996 @default.
• W3123604264 cites W1877185088 @default.
• W3123604264 cites W1977106683 @default.
• W3123604264 cites W1993429270 @default.
• W3123604264 cites W2011353069 @default.
• W3123604264 cites W2013758865 @default.
• W3123604264 cites W2018552538 @default.
• W3123604264 cites W2028988097 @default.
• W3123604264 cites W2046289784 @default.
• W3123604264 cites W2065366926 @default.
• W3123604264 cites W2095169544 @default.
• W3123604264 cites W2100568884 @default.
• W3123604264 cites W2109379189 @default.
• W3123604264 cites W2114765979 @default.
• W3123604264 cites W2120007557 @default.
• W3123604264 cites W2138863509 @default.
• W3123604264 cites W2140898820 @default.
• W3123604264 cites W2144395073 @default.
• W3123604264 cites W2170117542 @default.
• W3123604264 cites W2552441633 @default.
• W3123604264 cites W2990013835 @default.
• W3123604264 cites W3094419395 @default.
• W3123604264 cites W3123343837 @default.
• W3123604264 cites W3123726390 @default.
• W3123604264 cites W3124061054 @default.
• W3123604264 cites W3124605292 @default.
• W3123604264 cites W3124994600 @default.
• W3123604264 cites W3125275428 @default.
• W3123604264 cites W3125642192 @default.
• W3123604264 cites W31477686 @default.
• W3123604264 cites W40048283 @default.
• W3123604264 hasPublicationYear "2015" @default.
• W3123604264 type Work @default.
• W3123604264 sameAs 3123604264 @default.
• W3123604264 citedByCount "0" @default.
• W3123604264 crossrefType "posted-content" @default.
• W3123604264 hasAuthorship W3123604264A5004953557 @default.
• W3123604264 hasAuthorship W3123604264A5028984462 @default.
• W3123604264 hasAuthorship W3123604264A5070476778 @default.
• W3123604264 hasConcept C105795698 @default.
• W3123604264 hasConcept C111472728 @default.
• W3123604264 hasConcept C121332964 @default.
• W3123604264 hasConcept C126285488 @default.
• W3123604264 hasConcept C138885662 @default.
• W3123604264 hasConcept C144237770 @default.
• W3123604264 hasConcept C154815372 @default.
• W3123604264 hasConcept C162324750 @default.
• W3123604264 hasConcept C165556158 @default.
• W3123604264 hasConcept C175025494 @default.
• W3123604264 hasConcept C200941418 @default.
• W3123604264 hasConcept C2777152325 @default.
• W3123604264 hasConcept C33332235 @default.
• W3123604264 hasConcept C33923547 @default.
• W3123604264 hasConcept C556758197 @default.
• W3123604264 hasConcept C64848388 @default.
• W3123604264 hasConcept C8112001 @default.
• W3123604264 hasConcept C84888623 @default.
• W3123604264 hasConcept C96016098 @default.
• W3123604264 hasConceptScore W3123604264C105795698 @default.
• W3123604264 hasConceptScore W3123604264C111472728 @default.
• W3123604264 hasConceptScore W3123604264C121332964 @default.
• W3123604264 hasConceptScore W3123604264C126285488 @default.
• W3123604264 hasConceptScore W3123604264C138885662 @default.
• W3123604264 hasConceptScore W3123604264C144237770 @default.
• W3123604264 hasConceptScore W3123604264C154815372 @default.
• W3123604264 hasConceptScore W3123604264C162324750 @default.
• W3123604264 hasConceptScore W3123604264C165556158 @default.
• W3123604264 hasConceptScore W3123604264C175025494 @default.
• W3123604264 hasConceptScore W3123604264C200941418 @default.
• W3123604264 hasConceptScore W3123604264C2777152325 @default.
• W3123604264 hasConceptScore W3123604264C33332235 @default.
• W3123604264 hasConceptScore W3123604264C33923547 @default.
• W3123604264 hasConceptScore W3123604264C556758197 @default.
• W3123604264 hasConceptScore W3123604264C64848388 @default.
• W3123604264 hasConceptScore W3123604264C8112001 @default.
• W3123604264 hasConceptScore W3123604264C84888623 @default.
• W3123604264 hasConceptScore W3123604264C96016098 @default.
• W3123604264 hasLocation W31236042641 @default.
• W3123604264 hasOpenAccess W3123604264 @default.
• W3123604264 hasPrimaryLocation W31236042641 @default.
• W3123604264 hasRelatedWork W1608718722 @default.
• W3123604264 hasRelatedWork W1994039895 @default.
• W3123604264 hasRelatedWork W2028988097 @default.
• W3123604264 hasRelatedWork W2047627449 @default.
• W3123604264 hasRelatedWork W2346108521 @default.
• W3123604264 hasRelatedWork W2478980672 @default.
• W3123604264 hasRelatedWork W2492641651 @default.
• W3123604264 hasRelatedWork W2602789312 @default.

• next