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Disinflations with sticky information

Kiefer, Leonard Carl
http://rave.ohiolink.edu/etdc/view?acc_num=osu1180537823

Abstract Details

2007, Doctor of Philosophy, Ohio State University, Economics.
This dissertation consists of three essays examining the macroeconomic implications of the delayed acquisition and processing of information on the part of private agents. In "Optimal Monetary Policy with Disparate Expectations and Endogenous Inattention" I study optimal monetary policy in a world with rationally inattentive agents holding disparate expectations. I solve for the welfare maximizing monetary policy response to markup shocks given that agents choose the precision of their information. When agents gather less precise information, the trade-off between price instability and output stability grows more favorable. However, when the monetary authority tries to exploit this trade-off through more active policy, it induces private agents to acquire more information. I show that a reduction in markup shock volatility leads the central bank to moderate their response to shocks, simultaneously lowering the volatility of prices and output by leading agents to expend less effort in acquiring information. In "Imperfectly Credible Disinflations with Sticky Information" I study the effects of a disinflationary policy when price setting behavior is characterized by a Sticky Information Phillips Curve. Contrary to the results obtained with a standard Phillips Curve derived from sticky prices, a disinflation may lead to large recession. I study the optimal speed of disinflation and find that under the Sticky Information Phillips Curve, short rapid disinflations are more costly in terms of the welfare than a gradualist approach. Finally however, when credibility is endogenous more aggressive and rapid disinflations are more likely to be successful. In "Disinflations with Imperfect Common Knowledge about Changing Inflation Targets" I study how an economy with rationally inattentive agents responds to a shift in monetary policy from a high inflation to low inflation regime and how this response depends upon the nominal anchor. Specifically I compare disinflations engineered through price level targeting to disinflations engineered through inflation targeting. Calibrating the model under inflation targeting to the US experience during the Volcker Disinflation I compare the actual output costs of the disinflation to the simulated response to a price-level targeting regime. I find a modest reduction in the output losses arising from a disinflation with price level targeting.
William Dupor (Advisor)
108 p.
Economics, General
Disinflation; Rational Inattention; Sticky Information; Price-Level Targeting

Recommended Citations

Citations

  • Kiefer, L. C. (2007). Disinflations with sticky information [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1180537823

    APA Style (7th edition)

  • Kiefer, Leonard. Disinflations with sticky information. 2007. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1180537823.

    MLA Style (8th edition)

  • Kiefer, Leonard. "Disinflations with sticky information." Doctoral dissertation, Ohio State University, 2007. http://rave.ohiolink.edu/etdc/view?acc_num=osu1180537823

    Chicago Manual of Style (17th edition)

osu1180537823
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© 2007, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.