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| Daisuke Ida |
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| ''The gains from commitment when inflation persistence and data uncertainty coexist'' |
| ( 2011, Vol. 31 No.1 ) |
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| This paper investigates how the gains from commitment are large when inflation persistence and data uncertainty coexist. We consider two types of data uncertainty: measurement errors of potential output and inflation. We show that under a situation where data uncertainty exists, there are large gains from commitment as long as inflation is not extremely forward-looking or backward-looking. In particular, an increase in measurement error of inflation reduces the gains from commitment when forward-looking inflation is important, whereas there are large gains from commitment as long as inflation is not extremely backward-looking. |
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| Keywords: Inflation persistence, Data uncertainty, Optimal monetary policy |
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) |
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| Manuscript Received : Apr 30 2010 | | Manuscript Accepted : Jan 21 2011 |
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