What Do New-Keynesian Phillips Curves Imply for Price-Level Targeting? (ICPSR 1221)

Published: Aug 28, 2000 View help for published

Principal Investigator(s): View help for Principal Investigator(s)
William T. Gavin, Federal Reserve Bank of St. Louis; Robert Dittmar, Federal Reserve Bank of St. Louis

https://doi.org/10.3886/ICPSR01221.v1

Version V1

This article extends the analysis of price-level targeting to a model including the New-Keynesian Phillips Curve. The authors examine inflation-output variability tradeoffs implied by optimal inflation and price-level rules. In previous work with the Neoclassical Phillips Curve, the authors found that the choice between inflation targeting and price-level targeting depended on the amount of persistence in the output gap. That is, if the output gap was not too persistent, or if lagged output did not enter the aggregate supply function, then inflation targets were preferred to price-level targets. When one starts with a New-Keynesian Phillips Curve, the amount of persistence in the output gap still affects the relative placement of the inflation-output variability tradeoff. But, contrary to the Neoclassical case, even where the persistence of the output gap in the aggregate supply function is small or nonexistent, the price-level targeting regime still results in a more favorable tradeoff between output and inflation variability than does an inflation-targeting regime.

Gavin, William T., and Dittmar, Robert. What Do New-Keynesian Phillips Curves Imply for Price-Level Targeting? Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2000-08-28. https://doi.org/10.3886/ICPSR01221.v1

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2000-08-28

2000-08-28

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:
  • Gavin, William T., and Robert Dittmar. What Do New-Keynesian Phillips Curves Imply for Price-Level Targeting?. ICPSR01221-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2000-08-28. http://doi.org/10.3886/ICPSR01221.v1

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