Skip to Main content Skip to Navigation
Preprints, Working Papers, ...

The Signaling Effect of Raising Inflation

Abstract : This paper argues that central bankers should raise inflation when anticipating liquidity traps to signal their credibility to forward guidance policies. As stable inflation in normal times either stems from central banker's credibility, e.g. through reputation, or from his aversion to inflation, the private sector is unable to infer the central banker's type from observing stable inflation, jeopardizing the efficiency of forward guidance policy. We show that this signaling motive can justify level of inflation well above 2% but also that the low inflation volatility during the Great Moderation was insufficient to ensure fully efficient forward guidance when needed.
Document type :
Preprints, Working Papers, ...
Complete list of metadata

https://hal-sciencespo.archives-ouvertes.fr/hal-03471880
Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Thursday, December 9, 2021 - 5:27:37 AM
Last modification on : Friday, March 25, 2022 - 3:58:27 AM

File

wp-2016-06-barthelemy-mengus-s...
Publisher files allowed on an open archive

Identifiers

Citation

Jean Barthélemy, Eric Mengus. The Signaling Effect of Raising Inflation. 2016. ⟨hal-03471880⟩

Share

Metrics

Record views

8

Files downloads

5