Average inflation targeting could cut inequality – Fed paper
‘Hank’ models tend to be supportive of Fed’s new approach to inflation targeting, research finds
Average inflation targeting is likely to disproportionately benefit lower-income households, which could both cut inequality and boost the economy over the longer term, research published by the US Federal Reserve finds.
The paper, which was presented to policy-makers during the Fed’s recent inflation-targeting review, adopts a heterogeneous agent New Keynesian (Hank) model to better capture the prevalence of hand-to-mouth consumers in the economy.
Authors Laura Feiveson, Nils Goernemann
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