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Using laboratory experiments within a New Keynesian framework, we explore the interaction between the formation of inflation expectations and monetary policy design. The central question in this paper is how to design monetary policy when expectations formation is not perfectly rational.
From:
Damjan Pfajfa
Federal Reserve Board
Blaz Zakelj
Universitat Pompeu Fabra
Using laboratory experiments within a New Keynesian framework, we explore the interaction between the formation of inflation expectations and monetary policy design. The central question in this paper is how to design monetary policy when expectations formation is not perfectly rational.
From:
Damjan Pfajfa
Federal Reserve Board
Blaz Zakelj
Universitat Pompeu Fabra