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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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Price level targeting with evolving credibility, Journal of Monetary Economics December (2020). Honkapohja, Seppo; Mitra, Kaushik

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
Honkapohja Seppo / Bank of Finland
All authors as text Honkapohja, Seppo; Mitra, Kaushik 
Number of authors
Status Published
Year of publication 2020 
Date 29.11.2020 
Name of article Price level targeting with evolving credibility 
Name of journal Journal of Monetary Economics
Volume of issue 116 
Number of issue December 
Pages 88-103 
Abstract Global learning dynamics for price-level targeting (PLT) monetary policy are analyzed and compared to inflation targeting in a nonlinear New Keynesian model. Domain of attraction of target steady state is a new robustness criterion for policy regimes. Robustness of PLT depends on whether a known target path is incorporated into learning. Credibility is measured by accuracy of this forecasting method relative to simple statistical forecasts evolving through reinforcement learning. Initial credibility and target price are key factors influencing performance. Model results are in line with the Swedish experience of price stabilization in1930’s.
Free text descriptor in Finnish rahapolitiikka; inflaatio; tavoitteet; hinnat; oppiminen; uskottavuus; korko 
Free text descriptor in English Adaptive learning; Limited credibility; Inflation targeting; Zero interest rate lower bound 
JEL-codes E63, E52, E58 
ISSN / e-ISSN 0304-3932 
auki Internet addresses
Additional information Available online 13 September 2019.
'Any views expressed are those of the authors and do not necessarily reflect the views of the Bank of the Finland, where the first author worked while the
research was partly done.'
Notes BoF DP 5/2018 
Open Access Not known

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