Monetary Policy, Inflation Illusion and the Taylor Principle: An Experimental Study

Arbeitspapier

We develop a simple experimental setting to evaluate the role of the Taylor principle, which holds that the nominal interest rate has to respond more than one-for-one to fluctuations in the inflation rate. In our setting, the average inflation rate fluctuates around the inflation target if the computerized central bank obeys the Taylor principle. If the Taylor principle is violated, then the average inflation rate persistently deviates from the target. We find that these deviations from the target are less pronounced, if inflation rates cannot be as readily observed as nominal interest rates. This result is consistent with the interpretation that subjects underestimate the influence of inflation on the real return to savings if the inflation rate is only observed ex post.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Papers in Economics and Statistics ; No. 2013-03

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; Monetary Policy ; Design of Experiments: General
• Thema: Taylor principle ; Interest Rate Rule ; Inflation Illusion ; Laboratory Experiment

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Luhan, Wolfgang ; Scharler, Johann
• Ereignis: Veröffentlichung
• (wer): University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon)
• (wo): Innsbruck
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/73887
• Letzte Aktualisierung: 20.09.2024, 08:22 MESZ