Disagreement over inflation expectations weakens monetary policy – Bundesbank paper

Research uses data from Fed’s survey of professional forecasters from 1968 to 2017

The Deutsche Bundesbank

Empirical data from the US show that monetary policy is weakened if there is a high level of disagreement about the future course of inflation, a discussion paper published by the Deutsche Bundesbank argues.

In “Disagreement and monetary policy”, Elisabeth Falck, Mathias Hoffmann and Patrick Hürtgen say that New Keynesian dispersed-information models predict this result. They test this hypothesis by estimating the state-dependent effects of monetary policy for different levels of disagreement

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