Corpus ID: 154166819

Inflation Targeting, the Natural Rate and Expectations

  title={Inflation Targeting, the Natural Rate and Expectations},
  author={David Kiefer},
  • David Kiefer
  • Published 2008
  • Economics
  • In the new Keynesian model of endogenous stabilization governments have objectives with respect to macroeconomic performance, but are constrained by an augmented Phillips curve. Because they react quickly to inflation shocks, governments can lean against the macroeconomic wind. We develop an econometric test of this characterization of the political-economic equilibrium using the Kalman filter. Applying this methodology to a variety of quadratic social welfare functions, we find that an… CONTINUE READING

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