Implications for Determinacy with Average Inflation Targeting

8 Pages Posted: 18 May 2022

See all articles by Yamin S. Ahmad

Yamin S. Ahmad

Department of Economics, UW- Whitewater

James Murray

University of Wisconsin - La Crosse – Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 14, 2022

Abstract

]We use a standard New Keynesian model to explore implications of backward- and forward-looking windows for monetary policy with average inflation targeting and investigate the conditions for determinacy. A unique equilibrium rules out sunspot shocks that can lead to self-fulfilling shocks for inflation expectations. We find limitations for the length of the forward window and demonstrate how this depends on other parameters in the model, including parameters governing monetary policy and expectations formation.

Keywords: Average Inflation Targeting, Determinacy, Monetary Policy

JEL Classification: E50, E52, E58

Suggested Citation

Ahmad, Yamin S. and Murray, James, Implications for Determinacy with Average Inflation Targeting (May 14, 2022). Available at SSRN: https://ssrn.com/abstract=4110058 or http://dx.doi.org/10.2139/ssrn.4110058

Yamin S. Ahmad

Department of Economics, UW- Whitewater ( email )

Carlson Hall
800 W Main Street
Whitewater, WI 53190
United States
1 (262) 472 5576 (Phone)

HOME PAGE: http://facstaff.uww.edu/ahmady/

James Murray (Contact Author)

University of Wisconsin - La Crosse – Department of Economics ( email )

1725 State Street
La Crosse, WI 54601
United States
608-785-5140 (Phone)

HOME PAGE: http://www.murraylax.org

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