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Faculty of Economics

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Tambakis, D. N.

On the risk of long-run deflation

Economics Letters

Abstract: I determine expected long-run inflation in a two-state New Keynesian model driven by natural interest-rate uncertainty. Monetary policy switches between discretion in “normal times” and zero-lower-bound episodes when it is passive. Long-run U.S. inflation ranges from −1.8% to +1.2% p.a.

Keywords: Zero lower bound; Long-run inflation; Monetary policy

JEL Codes: E31, E52, E58

Publisher's Link: http://dx.doi.org/10.1016/j.econlet.2013.11.011



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