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Balancing economic recovery and inflationary concerns
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Resumo(s)
This paper provides an updated decomposition of headline PCE inflation in
the United States. A one asset HANK model is calibrated to match the US
and perfectly fit output and inflation data for the period 2020-2022. The most
interesting finding shows that the optimal monetary response to the inflation
gap uses a sensitivity parameter of 2.7 in contrast to the 1.25 common in
literature, suggesting a tighter monetary policy stance should improve overall
welfare. Relative welfare gains should be around 0.034%
Descrição
Palavras-chave
Monetary policy Sign restriction Hank Forecasting and simulation Inflation decomposition