{"title":"Inflation Shocks and Interest Rate Rules","authors":"Barbara Annicchiarico, A. Piergallini","doi":"10.2139/ssrn.921589","DOIUrl":null,"url":null,"abstract":"Recent empirical evidence by Fair (2002, 2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard ‘New Synthesis' literature. This paper reconsiders the effects of inflation shocks in a simple New Keynesian framework extended to include wealth effects. It is shown that, following an inflation shock, the decline of output coupled with passive interest rate rules is not puzzling.","PeriodicalId":416571,"journal":{"name":"CEIS: Centre for Economic & International Studies Working Paper Series","volume":"14 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2006-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"CEIS: Centre for Economic & International Studies Working Paper Series","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.921589","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 3
Abstract
Recent empirical evidence by Fair (2002, 2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard ‘New Synthesis' literature. This paper reconsiders the effects of inflation shocks in a simple New Keynesian framework extended to include wealth effects. It is shown that, following an inflation shock, the decline of output coupled with passive interest rate rules is not puzzling.
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