Average Inflation Targeting: Time Inconsistency and Ambiguous Communication / Chengcheng Jia, Jing Cynthia Wu.

Format:

Book

Author/Creator:

Jia, Chengcheng.

Contributor:

National Bureau of Economic Research.

Wu, Jing Cynthia.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29673.

NBER working paper series no. w29673

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We study the implications of average inflation targeting (AIT). AIT improves the inflation-output trade-off when the private sector believes the central bank's announcement. Ex post, the central bank has the incentive to implement inflation targeting instead to maximize social welfare. Next, we examine whether and how the central bank can convince the private sector, and find ambiguous communication helps the central bank gain credibility and improve welfare. These results apply to several key aspects of AIT announcement and do not rely on specific modeling assumptions.

Notes:

Print version record

January 2022.