Monetary policy must respond aggressively to persistent shocks – BoI paper

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Central banks need to use monetary policy more aggressively when confronted with macroeconomic shocks with persistent effects, a working paper published by the Bank of Italy finds.

In Benefits of gradualism or costs of inaction? Monetary policy in times of uncertainty, Giuseppe Ferrero, Mario Pietrunti and Andrea Tiseno use a simple forward-looking New Keynesian macroeconomic model. Their model relaxes the assumption that central banks have complete information about the economy, instead

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